II

106TH CONGRESS

1ST SESSION S. 200

To amend the Internal Revenue Code of 1986 to increase the years for

carryback of net operating losses for certain farm losses.

IN THE SENATE OF THE UNITED STATES

JANUARY 19, 1999

Mr. HARKIN (for himself and Mr. JOHNSON) introduced the following bill;

which was read twice and referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to increase

the years for carryback of net operating losses for certain

farm losses.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. NET OPERATING LOSS OF FARMERS.

4 (a) INCREASE IN CARRYBACK YEARS.—Paragraph

5 (1) of section 172(b) of the Internal Revenue Code of

6 1986 (relating to net operating loss carrybacks and

7 carryforwards) is amended by adding at the end the fol8 lowing new subparagraph:

9 ‘‘(G) FARMING LOSSES.—Subparagraph

10 (A)(i) shall be applied by substituting ‘10 years’
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1 for ‘2 years’ with respect to the portion of the

2 net operating loss of an eligible taxpayer (as de3 fined in subsection (i)) for any taxable year be4 ginning after December 31, 1997, and ending

5 before January 1, 2000, which is a farming loss

6 (as so defined) with respect to the taxpayer.’’

7 (b) DEFINITIONS AND RULES RELATING TO FARM8 ING LOSSES.—Section 172 of such Code is amended by

9 redesignating subsection (i) as subsection (j) and inserting

10 after subsection (h) the following new subsection:

11 ‘‘(i) DEFINITIONS AND RULES RELATING TO FARM12 ING LOSSES.—For purposes of this section—

13 ‘‘(1) FARMING LOSS.—

14 ‘‘(A) IN GENERAL.—The term ‘farming

15 loss’ means the lesser of—

16 ‘‘(i) the net operating loss of the tax17 payer for the taxable year, or

18 ‘‘(ii) the net operating loss of the tax19 payer for the taxable year determined by

20 only taking into account items of income

21 and deduction attributable to 1 or more

22 qualified farming business of the taxpayer.

23 ‘‘(B) DOLLAR LIMITATION.—
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1 ‘‘(i) IN GENERAL.—The farming loss

2 of taxpayer for any taxable year shall not

3 exceed $200,000.

4 ‘‘(ii) AGGREGATION RULES.—

5 ‘‘(I) IN GENERAL.—All persons

6 treated as 1 employer under sub7 sections (a) or (b) of section 52 shall

8 be treated as 1 person.

9 ‘‘(II) PASS-THRU ENTITY.—In

10 the case of a partnership, trust, or

11 other pass-thru entity, the limitation

12 shall be applied at both the entity and

13 the owner level.

14 ‘‘(III) OWNER.—The limitation

15 shall be reduced by the amount of

16 farming loss determined for a cor17 poration for which the taxpayer is a

18 50 percent owner in the taxable year

19 of the corporation ending in the tax20 able year of the taxpayer owner.

21 ‘‘(2) ELIGIBLE TAXPAYER.—

22 ‘‘(A) IN GENERAL.—The term ‘eligible tax23 payer’ means a taxpayer which derives more

24 than 50 percent of its gross income for the 3-

25 year period beginning 2 years prior to the cur-
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1 rent taxable year from qualified farming busi2 nesses.

3 ‘‘(B) QUALIFIED FARMING BUSINESS.—

4 The term ‘qualified farming business’ means a

5 trade or business of farming (within the mean6 ing of section 2032A)—

7 ‘‘(i) with respect to which—

8 ‘‘(I) the taxpayer or a member of

9 the family of the taxpayer materially

10 participates (within the meaning of

11 section 2032A(e)(6)), or

12 ‘‘(II) in the case of a taxpayer

13 other than an individual, a 20 percent

14 owner of the taxpayer or a member of

15 the owner’s family materially partici16 pates (as so defined), and

17 ‘‘(ii) which does not receive in excess

18 of $7,000,000 for sales in a taxable year.

19 For purposes of clause (i)(II), owners which are

20 members of a single family shall be treated as

21 a single owner.

22 ‘‘(3) OWNER.—

23 ‘‘(A) 20 PERCENT OWNER.—The term ‘20

24 percent owner’ means any person who would be

25 described in section 416(i)(1)(B)(i) if ‘20 per-
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1 cent’ were substituted for ‘5 percent’ each place

2 it appears in such section.

3 ‘‘(B) 50 PERCENT OWNER.—The term ‘50

4 percent owner’ means any person who would be

5 described in section 416(i)(1)(B)(i) if ‘50 per6 cent’ were substituted for ‘5 percent’ each place

7 it appears in such section.

8 ‘‘(4) COORDINATION WITH SUBSECTION

9 (b)(2).—For purposes of applying subsection (b)(2),

10 a farming loss for any taxable year shall be treated

11 as a separate net operating loss for such taxable

12 year to be taken into account for the remaining por13 tion of the net operating loss for such taxable year.

14 ‘‘(5) ELECTION.—Any taxpayer entitled to a

15 10-year carryback under subsection (b)(1)(G) from

16 any loss year may elect to have the carryback period

17 with respect to such loss year, and any portion of

18 the farming loss for such year, determined without

19 regard to subsection (b)(1)(G): Such election shall

20 be made in such manner as may be prescribed by

21 the Secretary and shall be made by the due date (in22 cluding extensions of time) for filing the taxpayer’s

23 return for the taxable year of the net operating loss.
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1 Such election, once made for any taxable year, shall

2 be irrevocable for the taxable year.’’

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