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.

I 116TH CONGRESS 2D SESSION H. R. 6579 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 tax- payers. 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) in- troduced 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 cer- tain 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. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 6579 IH SECTION 1. LIMITATION ON EXCESS BUSINESS LOSSES OF 1 NON-CORPORATE TAXPAYERS RESTORED 2 AND MADE PERMANENT. 3 (a) IN GENERAL.—Section 461(l)(1) of the Internal 4 Revenue Code of 1986 is amended to read as follows: 5 ‘‘(1) LIMITATION.—In the case of taxable year 6 of a taxpayer other than a corporation beginning 7 after December 31, 2017— 8 ‘‘(A) subsection (j) (relating to limitation 9 on excess farm losses of certain taxpayers) shall 10 not apply, and 11 ‘‘(B) any excess business loss of the tax- 12 payer for the taxable year shall not be al- 13 lowed.’’. 14 (b) EFFECTIVE DATE.—The amendment made by 15 this section shall take effect as if included in section 16 2304(a) of the Coronavirus Aid, Relief, and Economic Se- 17 curity Act. 18 SEC. 2. CERTAIN TAXPAYERS ALLOWED 2-YEAR 19 CARRYBACK OF NET OPERATING LOSSES 20 ARISING IN 2020. 21 (a) TWO-YEAR CARRYBACK OF LOSSES ARISING IN 22 2020.— 23 (1) IN GENERAL.—Section 172(b)(1)(D)(i) of 24 the Internal Revenue Code of 1986 is amended— 25 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 6579 IH (A) by striking ‘‘beginning after December 1 31, 2017’’ and inserting ‘‘beginning after De- 2 cember 31, 2019’’, and 3 (B) by striking ‘‘5 taxable years’’ in sub- 4 clause (I) and inserting ‘‘2 taxable years’’. 5 (2) CONFORMING AMENDMENTS.— 6 (A) The heading for section 172(b)(1)(D) 7 of such Code is amended by striking ‘‘2018, 8 2019, AND’’. 9 (B) Section 172(b)(1)(D) of such Code is 10 amended by striking clause (iii) and by redesig- 11 nating clauses (iv) and (v) as clauses (iii) and 12 (iv), respectively. 13 (C) Section 172(b)(1)(D)(iv) of such Code, 14 as so redesignated, is amended— 15 (i) by striking subclause (II), and 16 (ii) by striking ‘‘SPECIAL RULES’’ and 17 all that follows through ‘‘If the 5-year 18 carryback period’’ and inserting the fol- 19 lowing: ‘‘SPECIAL RULE FOR ELECTION 20 UNDER PARAGRAPH (3) TO EXCLUDE SEC- 21 TION 965 YEARS.—If the 2-year carryback 22 period’’. 23 (b) CARRYBACK ONLY ALLOWED FOR SMALL BUSI- 24 NESSES.— 25 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 6579 IH (1) IN GENERAL.—Section 172(b)(1)(D)(i) of 1 such Code is amended by striking ‘‘net operating 2 loss arising’’ and inserting ‘‘net operating loss of an 3 eligible small business arising’’. 4 (2) ELIGIBLE SMALL BUSINESS.—Section 5 172(b)(1)(D) of such Code, as amended by the pre- 6 ceding provisions of this Act, is amended by adding 7 at the end the following new clause: 8 ‘‘(v) ELIGIBLE SMALL BUSINESS.— 9 For purposes of clause (i), the term ‘eligi- 10 ble small business’ means a corporation or 11 partnership which meets the gross receipts 12 test of section 448(c) (applied by sub- 13 stituting ‘$15,000,000’ for ‘$25,000,000’ 14 each place it appears) for the taxable year 15 in which the loss arose (or, in the case of 16 a sole proprietorship, which would meet 17 such test if such proprietorship were a cor- 18 poration).’’. 19 (c) DISALLOWED FOR CERTAIN TAXPAYERS.—Sec- 20 tion 172(b)(1)(D) of such Code, as amended by the pre- 21 ceding provisions of this Act, is amended by adding at the 22 end the following new clauses: 23 ‘‘(vi) CARRYBACK DISALLOWED FOR 24 CERTAIN TAXPAYERS.—Clause (i) shall not 25 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 5 •HR 6579 IH apply with respect to any loss arising in a 1 taxable year in which— 2 ‘‘(I) the taxpayer (or any related 3 person) is not allowed a deduction 4 under this chapter for the taxable 5 year by reason of section 162(m) or 6 section 280G, or 7 ‘‘(II) the taxpayer (or any related 8 person) is a specified corporation for 9 the taxable year. 10 ‘‘(vii) SPECIFIED CORPORATION.—For 11 purposes of clause (vi)— 12 ‘‘(I) IN GENERAL.—The term 13 ‘specified corporation’ means, with re- 14 spect to any taxable year, a corpora- 15 tion the aggregate distributions (in- 16 cluding redemptions) of which during 17 all taxable years ending after Decem- 18 ber 31, 2017, exceed the sum of appli- 19 cable stock issued of such corporation 20 and 5 percent of the fair market value 21 of the stock of such corporation as of 22 the last day of the taxable year. 23 ‘‘(II) APPLICABLE STOCK 24 ISSUED.—The term ‘applicable stock 25 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 6 •HR 6579 IH issued’ means, with respect to any 1 corporation, the aggregate value of 2 stock issued by the corporation during 3 all taxable years ending after Decem- 4 ber 31, 2017, in exchange for money 5 or property other than stock in such 6 corporation. 7 ‘‘(III) CERTAIN PREFERRED 8 STOCK DISREGARDED.—For purposes 9 of subclause (I), stock described in 10 section 1504(a)(4), and distributions 11 (including redemptions) with respect 12 to such stock, shall be disregarded. 13 ‘‘(viii) RELATED PERSON.—For pur- 14 poses of clause (vi), a person is a related 15 person to a taxpayer if the related person 16 bears a relationship to the taxpayer speci- 17 fied in section 267(b) or section 18 707(b)(1).’’. 19 (d) ADVANCE CARRYBACK OF ESTIMATED NET OP- 20 ERATING LOSSES ARISING IN 2020.— 21 (1) IN GENERAL.—In the case of a taxable year 22 beginning after December 31, 2019, and before Jan- 23 uary 1, 2021, a taxpayer may file an application 24 with the Secretary of the Treasury for an advance 25 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 7 •HR 6579 IH carryback adjustment of the tax for a prior taxable 1 year that would be affected, by reason of the amend- 2 ments made by this section, by so much of any net 3 operating loss estimated by the taxpayer to arise in 4 the taxable year to which the application relates as 5 does not exceed $100,000. 6 (2) APPLICATION.—The application shall set 7 forth in such detail and with such supporting data 8 and explanation as the Secretary may require an es- 9 timate of the taxpayer’s net operating loss that will 10 arise in such taxable year. 11 (3) DUE DATE FOR APPLICATION.—An applica- 12 tion under this subsection may not be filed later 13 than the due date for filing the return for the tax- 14 able year of the net operating loss from which the 15 carryback results. 16 (4) ALLOWANCE OF ADJUSTMENTS.—Not later 17 than 30 days after the date on which an application 18 for an advance carryback adjustment is filed under 19 paragraph (1), the Secretary shall dispose of such 20 application under rules similar to the rules of section 21 6411 of the Internal Revenue Code of 1986. 22 (5) REDUCTION OF NET OPERATING LOSS FOR 23 APPLICATION YEAR.—The amount of any net oper- 24 ating loss (determined without regard to this para- 25 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 8 •HR 6579 IH graph) of the taxpayer for any taxable year from 1 which an advance carryback adjustment is made 2 under this subsection shall be reduced (but not 3 below zero) by the amount of estimated net oper- 4 ating loss taken into account in determining an ad- 5 vance carryback adjustment of the taxpayer under 6 this subsection. 7 (6) RECAPTURE.—The taxpayer’s tax imposed 8 by chapter 1 for such taxable year shall be increased 9 by the excess (if any) of— 10 (A) the reduction in tax for all prior tax- 11 able years by reason of an advance carryback 12 adjustment under this subsection, over 13 (B) the reduction in tax for all prior tax- 14 able years by reason of a net operating loss fi- 15 nally arising in the taxable year to which the 16 application under this section relates. 17 (7) REFERENCES TO SECRETARY.—Any ref- 18 erence to the Secretary of the Treasury in this sub- 19 section shall be treated as including a reference to 20 the Secretary’s delegate. 21 (e) EFFECTIVE DATE.—The amendments made by 22 this section shall take effect as if included in the enact- 23 VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS 9 •HR 6579 IH ment of section 2302(b) of the Coronavirus Aid, Relief, 1 and Economic Security Act. 2 Æ VerDate Sep 11 2014 18:41 Apr 24, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H6579.IH H6579 pamtmann on DSKBC07HB2PROD with BILLS