To amend the Internal Revenue Code of 1986 to allow certain taxpayers a 2-year carryback of net operating losses and to restore and make permanent the limitation on excess business losses of non-corporate taxpayers.

Bill: 116-hr-6579
Sponsor: full_name: Rep. Doggett, Lloyd [D-TX-35]
Introduced: 2020-04-21
Policy area: Taxation
Subjects: Agricultural prices, subsidies, credit

Business expenses

Income tax deductions

Small business

Tax administration and collection, taxpayers
Latest action: action_date: 2020-04-21
text: Referred to the House Committee on Ways and Means.

Summaries:
action_date: 2020-04-21
action_desc: Introduced in House
text: <p>This bill makes permanent the limitation on excess business losses of noncorporate taxpayers and allows certain taxpayers a two-year carryback of net operating losses arising in 2020. </p>

tv_txt: I 116th CONGRESS 2d Session H. R. 6579 IN THE HOUSE OF REPRESENTATIVES April 21, 2020 Mr. Doggett (for himself, Mr. Raskin , Ms. DeLauro , Mr. Cohen , Mr. Beyer , Mr. Blumenauer , Mr. Khanna , Mr. Pocan , Ms. Schakowsky , Mr. Welch , Ms. Wild , Mr. DeFazio , Ms. Jayapal , and Ms. Omar ) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to allow certain taxpayers a 2-year carryback of net operating losses and to restore and make permanent the limitation on excess business losses of non-corporate taxpayers.

1. Limitation on excess business losses of non-corporate taxpayers restored and made permanent (a) In general Section 461(l)(1) of the Internal Revenue Code of 1986 is amended to read as follows: (1) Limitation In the case of taxable year of a taxpayer other than a corporation beginning after December 31, 2017— (A) subsection (j) (relating to limitation on excess farm losses of certain taxpayers) shall not apply, and (B) any excess business loss of the taxpayer for the taxable year shall not be allowed. . (b) Effective date The amendment made by this section shall take effect as if included in section 2304(a) of the Coronavirus Aid, Relief, and Economic Security Act. 2. Certain taxpayers allowed 2 -year carryback of net operating losses arising in 2020 (a) Two-Year carryback of losses arising in 2020 (1) In general Section 172(b)(1)(D)(i) of the Internal Revenue Code of 1986 is amended— (A) by striking beginning after December 31, 2017 and inserting beginning after December 31, 2019 , and (B) by striking 5 taxable years in subclause (I) and inserting 2 taxable years . (2) Conforming amendments (A) The heading for section 172(b)(1)(D) of such Code is amended by striking 2018, 2019, and . (B) Section 172(b)(1)(D) of such Code is amended by striking clause (iii) and by redesignating clauses (iv) and (v) as clauses (iii) and (iv), respectively. (C) Section 172(b)(1)(D)(iv) of such Code, as so redesignated, is amended— (i) by striking subclause (II), and (ii) by striking Special rules and all that follows through If the 5-year carryback period and inserting the following: Special rule for election under paragraph (3) to exclude section 965 years.— If the 2-year carryback period . (b) Carryback only allowed for small businesses (1) In general Section 172(b)(1)(D)(i) of such Code is amended by striking net operating loss arising and inserting net operating loss of an eligible small business arising . (2) Eligible small business Section 172(b)(1)(D) of such Code, as amended by the preceding provisions of this Act, is amended by adding at the end the following new clause: (v) Eligible small business For purposes of clause (i), the term eligible small business means a corporation or partnership which meets the gross receipts test of section 448(c) (applied by substituting $15,000,000 for $25,000,000 each place it appears) for the taxable year in which the loss arose (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation). . (c) Disallowed for certain taxpayers Section 172(b)(1)(D) of such Code, as amended by the preceding provisions of this Act, is amended by adding at the end the following new clauses: (vi) Carryback disallowed for certain taxpayers Clause (i) shall not apply with respect to any loss arising in a taxable year in which— (I) the taxpayer (or any related person) is not allowed a deduction under this chapter for the taxable year by reason of section 162(m) or section 280G, or (II) the taxpayer (or any related person) is a specified corporation for the taxable year. (vii) Specified corporation For purposes of clause (vi)— (I) In general The term specified corporation means, with respect to any taxable year, a corporation the aggregate distributions (including redemptions) of which during all taxable years ending after December 31, 2017, exceed the sum of applicable stock issued of such corporation and 5 percent of the fair market value of the stock of such corporation as of the last day of the taxable year. (II) Applicable stock issued The term applicable stock issued means, with respect to any corporation, the aggregate value of stock issued by the corporation during all taxable years ending after December 31, 2017, in exchange for money or property other than stock in such corporation. (III) Certain preferred stock disregarded For purposes of subclause (I), stock described in section 1504(a)(4), and distributions (including redemptions) with respect to such stock, shall be disregarded. (viii) Related person For purposes of clause (vi), a person is a related person to a taxpayer if the related person bears a relationship to the taxpayer specified in section 267(b) or section 707(b)(1). . (d) Advance carryback of estimated net operating losses arising in 2020 (1) In general In the case of a taxable year beginning after December 31, 2019, and before January 1, 2021, a taxpayer may file an application with the Secretary of the Treasury for an advance carryback adjustment of the tax for a prior taxable year that would be affected, by reason of the amendments made by this section, by so much of any net operating loss estimated by the taxpayer to arise in the taxable year to which the application relates as does not exceed $100,000. (2) Application The application shall set forth in such detail and with such supporting data and explanation as the Secretary may require an estimate of the taxpayer’s net operating loss that will arise in such taxable year. (3) Due date for application An application under this subsection may not be filed later than the due date for filing the return for the taxable year of the net operating loss from which the carryback results. (4) Allowance of adjustments Not later than 30 days after the date on which an application for an advance carryback adjustment is filed under paragraph (1), the Secretary shall dispose of such application under rules similar to the rules of section 6411 of the Internal Revenue Code of 1986. (5) Reduction of net operating loss for application year The amount of any net operating loss (determined without regard to this paragraph) of the taxpayer for any taxable year from which an advance carryback adjustment is made under this subsection shall be reduced (but not below zero) by the amount of estimated net operating loss taken into account in determining an advance carryback adjustment of the taxpayer under this subsection. (6) Recapture The taxpayer’s tax imposed by chapter 1 for such taxable year shall be increased by the excess (if any) of— (A) the reduction in tax for all prior taxable years by reason of an advance carryback adjustment under this subsection, over (B) the reduction in tax for all prior taxable years by reason of a net operating loss finally arising in the taxable year to which the application under this section relates. (7) References to Secretary Any reference to the Secretary of the Treasury in this subsection shall be treated as including a reference to the Secretary’s delegate. (e) Effective date The amendments made by this section shall take effect as if included in the enactment of section 2302(b) of the Coronavirus Aid, Relief, and Economic Security Act.