Net Operating Loss Clarification Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1996 To amend the Internal Revenue Code of 1986 to clarify the application of the net operating loss deduction. IN THE SENATE OF THE UNITED STATES JUNE 26, 2019 Ms. MCSALLY (for herself, Ms. SINEMA, Mrs. BLACKBURN, Mr. CORNYN, and Mr. ALEXANDER) 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 clarify the application of the net operating loss deduction. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Net Operating Loss 4 Clarification Act of 2019’’. 5 SEC. 2. TECHNICAL AMENDMENTS RELATING TO THE NET 6 OPERATING LOSS DEDUCTION. 7 (a) CLARIFICATION OF EFFECTIVE DATE OF NET 8 OPERATING LOSS RULES.—Section 13302(e) of Public 9 Law 115–97 is amended— 10 VerDate Sep 11 2014 23:16 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1996.IS S1996 pamtmann on DSKBFK8HB2PROD with BILLS 2 •S 1996 IS (1) by striking all that follows ‘‘shall apply to’’ 1 in paragraph (1) and inserting ‘‘taxable years to 2 which losses arising in taxable years beginning after 3 December 31, 2017, may be carried.’’, and 4 (2) by striking ‘‘ending’’ in paragraph (2) and 5 inserting ‘‘beginning’’. 6 (b) CLARIFICATION OF NET OPERATING LOSS 7 CARRYBACK FOR FARMING LOSSES AND CERTAIN INSUR- 8 ANCE COMPANIES.—Section 172(b)(1)(A) of the Internal 9 Revenue Code of 1986 is amended to read as follows: 10 ‘‘(A) GENERAL RULE.—A net operating 11 loss for any taxable year— 12 ‘‘(i) shall be a net operating loss 13 carryback to the extent provided in sub- 14 paragraphs (B) and (C)(i), and 15 ‘‘(ii) except as provided in subpara- 16 graph (C)(ii), shall be a net operating loss 17 carryover— 18 ‘‘(I) in the case of a net oper- 19 ating loss arising in a taxable year be- 20 ginning before January 1, 2018, to 21 each of the 20 taxable years following 22 the taxable year of the loss, and 23 ‘‘(II) in the case of a net oper- 24 ating loss arising in a taxable year be- 25 VerDate Sep 11 2014 23:16 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1996.IS S1996 pamtmann on DSKBFK8HB2PROD with BILLS 3 •S 1996 IS ginning after December 31, 2017, to 1 each taxable year following the tax- 2 able year of the loss.’’. 3 (c) CLARIFICATION OF DETERMINATION OF TAX- 4 ABLE INCOME.—Section 172(a)(2) of the Internal Rev- 5 enue Code of 1986 is amended by striking ‘‘deduction al- 6 lowable under this section’’ and inserting ‘‘deductions al- 7 lowable under this section and sections 199A and 250’’. 8 (d) CLARIFICATION OF ORDER AND METHOD OF NET 9 OPERATING LOSS CALCULATION.— 10 (1) IN GENERAL.—Section 172 of the Internal 11 Revenue Code of 1986 is amended by redesignating 12 subsection (g) as subsection (h) and by inserting 13 after subsection (f) the following new subsection: 14 ‘‘(g) SPECIAL RULE FOR LOSSES FROM TAXABLE 15 YEARS BEGINNING BEFORE JANUARY 1, 2018.—In the 16 case of a taxable year (hereafter in this subsection referred 17 to as the ‘current year’) to which is carried a net operating 18 loss arising in a taxable year beginning before January 19 1, 2018, the amount determined under subsection (a) for 20 the current taxable year shall be an amount equal to the 21 sum of— 22 ‘‘(1) the aggregate amount of such net oper- 23 ating losses carried to the current taxable year, and 24 ‘‘(2) the lesser of— 25 VerDate Sep 11 2014 23:16 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1996.IS S1996 pamtmann on DSKBFK8HB2PROD with BILLS 4 •S 1996 IS ‘‘(A) the aggregate amount of net oper- 1 ating losses arising in taxable years beginning 2 after December 31, 2017, which are carried to 3 the current taxable year, or 4 ‘‘(B) 80 percent of the excess (if any) of— 5 ‘‘(i) taxable income computed without 6 regard to the deductions allowable under 7 this section and sections 199A and 250, 8 over 9 ‘‘(ii) the amount determined under 10 paragraph (1).’’. 11 (2) CONFORMING AMENDMENT.—Section 12 172(b)(2)(C) of such Code is amended to read as 13 follows: 14 ‘‘(C) be reduced by 20 percent of taxable 15 income computed under section (a)(2) for such 16 prior taxable year (or if subsection (g) applies 17 to such prior taxable year, 20 percent of the ex- 18 cess described in subsection (g)(2)(B) for such 19 year).’’. 20 (e) CONFORMING AMENDMENTS TO RULES REGARD- 21 ING REMICS.—Section 860E(a)(3)(B) of the Internal 22 Revenue Code of 1986 is amended by striking all that fol- 23 lows ‘‘for purposes of’’ and inserting ‘‘subsection (a)(2), 24 VerDate Sep 11 2014 23:16 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1996.IS S1996 pamtmann on DSKBFK8HB2PROD with BILLS 5 •S 1996 IS and the second sentence of subsection (b)(2), of section 1 172.’’. 2 (f) ACCELERATED REFUNDS.—In the case of a net 3 operating loss carryback which is allowed for a taxable 4 year by reason of the amendments made by subsections 5 (a) through (e), an application under section 6411(a) of 6 the Internal Revenue Code of 1986 with respect to such 7 carryback shall not fail to be treated as timely filed if filed 8 by the later of— 9 (1) the date which is 4 months after the date 10 of the enactment of this Act, or 11 (2) the date otherwise applicable under section 12 6411(a) of such Code. 13 (g) EFFECTIVE DATE.—The amendments made by 14 subsections (a) through (e) shall take effect as if included 15 in the provision of Public Law 115–97 to which they re- 16 late. 17 Æ VerDate Sep 11 2014 23:16 Jul 01, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\S1996.IS 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