CARES Windfall for the Wealthiest Repeal Act

II 116TH CONGRESS 2D SESSION S. 3640 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 SENATE OF THE UNITED STATES MAY 7, 2020 Mr. WHITEHOUSE (for himself, Mr. BROWN, Mr. LEAHY, Mr. SANDERS, Mr. UDALL, Mr. BLUMENTHAL, Mr. DURBIN, Mr. MARKEY, Mr. VAN HOL- LEN, Mr. KING, Ms. WARREN, Ms. HARRIS, Mr. CARPER, Ms. KLO- BUCHAR, Mr. COONS, Mr. REED, Mr. MURPHY, Mrs. GILLIBRAND, Mr. BOOKER, Ms. BALDWIN, Ms. SMITH, Ms. HIRONO, Mr. SCHATZ, and Mr. MERKLEY) introduced the following bill; which was read twice and re- ferred to the Committee on Finance 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 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘CARES Windfall for 4 the Wealthiest Repeal Act’’. 5 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 3640 IS SEC. 2. LIMITATION ON EXCESS BUSINESS LOSSES OF NON- 1 CORPORATE TAXPAYERS RESTORED AND 2 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, any excess business loss 8 of the taxpayer for the taxable year shall not be al- 9 lowed.’’. 10 (b) CONFORMING AMENDMENT.—Section 461 of 11 such Code is amended by striking subsection (j). 12 (c) EFFECTIVE DATE.—The amendments made by 13 this section shall take effect as if included in section 14 2304(a) of the Coronavirus Aid, Relief, and Economic Se- 15 curity Act. 16 SEC. 3. CERTAIN TAXPAYERS ALLOWED 2-YEAR 17 CARRYBACK OF NET OPERATING LOSSES 18 ARISING IN CERTAIN PERIODS. 19 (a) TWO-YEAR CARRYBACK OF LOSSES ARISING IN 20 CERTAIN PERIODS.— 21 (1) IN GENERAL.—Section 172(b)(1)(D)(i) of 22 the Internal Revenue Code of 1986 is amended— 23 (A) by striking ‘‘arising in a taxable year 24 beginning after December 31, 2017, and ending 25 before January 1, 2021’’ and inserting ‘‘arising 26 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 3640 IS in the first taxable year beginning after August 1 31, 2019’’, and 2 (B) by striking ‘‘5 taxable years’’ in sub- 3 clause (I) and inserting ‘‘2 taxable years’’. 4 (2) CONFORMING AMENDMENTS.— 5 (A) The heading for section 172(b)(1)(D) 6 of such Code is amended by striking ‘‘2018, 7 2019, AND 2020’’ and inserting ‘‘CERTAIN PERI- 8 ODS’’. 9 (B) Section 172(b)(1)(D)(v) of such Code 10 is amended— 11 (i) by striking subclause (II), and 12 (ii) by striking ‘‘SPECIAL RULES’’ and 13 all that follows through ‘‘If the 5-year 14 carryback period’’ and inserting the fol- 15 lowing: ‘‘SPECIAL RULE FOR ELECTION 16 UNDER PARAGRAPH (3) TO EXCLUDE SEC- 17 TION 965 YEARS.—If the 2-year carryback 18 period’’. 19 (b) CARRYBACK ONLY ALLOWED FOR SMALL BUSI- 20 NESSES.— 21 (1) IN GENERAL.—Section 172(b)(1)(D)(i) of 22 such Code is amended by striking ‘‘net operating 23 loss arising’’ and inserting ‘‘net operating loss of an 24 eligible small business arising’’. 25 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 3640 IS (2) ELIGIBLE SMALL BUSINESS.—Section 1 172(b)(1)(D) of such Code is amended by adding at 2 the end the following new clause: 3 ‘‘(vi) ELIGIBLE SMALL BUSINESS.— 4 For purposes of clause (i), the term ‘eligi- 5 ble small business’ means a corporation or 6 partnership which— 7 ‘‘(I) meets the gross receipts test 8 of section 448(c) (applied by sub- 9 stituting ‘$15,000,000’ for 10 ‘$25,000,000’ each place it appears) 11 for the taxable year in which the loss 12 arose (or, in the case of a sole propri- 13 etorship, which would meet such test 14 if such proprietorship were a corpora- 15 tion), and 16 ‘‘(II) elects the application of this 17 subparagraph. 18 Any election under subclause (II) shall be 19 made in such manner as may be prescribed 20 by the Secretary, and shall be made by the 21 due date (including extension of time) for 22 filing the return for the taxpayer’s the tax- 23 able year in which the loss arose. Any such 24 election, once made, shall be irrevocable.’’. 25 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 3640 IS (c) DISALLOWED FOR CERTAIN TAXPAYERS.—Sec- 1 tion 172(b)(1)(D) of such Code, as amended by the pre- 2 ceding provisions of this Act, is amended by adding at the 3 end the following new clauses: 4 ‘‘(vii) CARRYBACK DISALLOWED FOR 5 CERTAIN TAXPAYERS.—Clause (i) shall not 6 apply with respect to any loss arising in a 7 taxable year in which— 8 ‘‘(I) the taxpayer (or any related 9 person) is not allowed a deduction 10 under this chapter for the taxable 11 year by reason of section 162(m) or 12 section 280G, or 13 ‘‘(II) the taxpayer (or any related 14 person) is a specified corporation for 15 the taxable year. 16 ‘‘(viii) SPECIFIED CORPORATION.— 17 For purposes of clause (vii)— 18 ‘‘(I) IN GENERAL.—The term 19 ‘specified corporation’ means, with re- 20 spect to any taxable year, a corpora- 21 tion the aggregate distributions (in- 22 cluding redemptions) of which during 23 all taxable years ending after Decem- 24 ber 31, 2017, exceed the sum of appli- 25 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 3640 IS cable stock issued by such corporation 1 and 5 percent of the fair market value 2 of the stock of such corporation as of 3 the last day of the taxable year. 4 ‘‘(II) APPLICABLE STOCK 5 ISSUED.—The term ‘applicable stock 6 issued’ means, with respect to any 7 corporation, the aggregate value of 8 stock issued by the corporation during 9 all taxable years ending after Decem- 10 ber 31, 2017, in exchange for money 11 or property other than stock in such 12 corporation. 13 ‘‘(III) CERTAIN PREFERRED 14 STOCK DISREGARDED.—For purposes 15 of subclause (I), stock described in 16 section 1504(a)(4), and distributions 17 (including redemptions) with respect 18 to such stock, shall be disregarded. 19 ‘‘(ix) RELATED PERSON.—For pur- 20 poses of clause (vii), a person is a related 21 person to a taxpayer if the related person 22 bears a relationship to the taxpayer speci- 23 fied in section 267(b) or section 24 707(b)(1).’’. 25 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 3640 IS (d) ADVANCE CARRYBACK OF ESTIMATED NET OP- 1 ERATING LOSSES ARISING IN 2020.— 2 (1) IN GENERAL.—In the case of any taxpayer 3 expecting a net operating loss for the first taxable 4 year beginning after August 31, 2019, such taxpayer 5 may file an application with the Secretary of the 6 Treasury for an advance carryback adjustment of 7 the tax for a prior taxable year that would be af- 8 fected, by reason of the amendments made by this 9 section, by so much of such expected net operating 10 loss as does not exceed $100,000. 11 (2) APPLICATION.—The application filed under 12 paragraph (1) shall set forth in such detail and with 13 such supporting data and explanation as the Sec- 14 retary may require an estimate of the taxpayer’s net 15 operating loss that will arise in such taxable year. 16 (3) DUE DATE FOR APPLICATION.—An applica- 17 tion under this subsection may not be filed later 18 than the due date (including extensions of time) of 19 the return for the first taxable year beginning after 20 August 31, 2019. 21 (4) ALLOWANCE OF ADJUSTMENTS.—Not later 22 than 30 days after the date on which an application 23 for an advance carryback adjustment is filed under 24 paragraph (1), the Secretary shall dispose of such 25 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 3640 IS application under rules similar to the rules of section 1 6411 of the Internal Revenue Code of 1986. 2 (5) REDUCTION OF NET OPERATING LOSS FOR 3 APPLICATION YEAR.—The amount of any net oper- 4 ating loss (determined without regard to this para- 5 graph) of the taxpayer for any taxable year from 6 which an advance carryback adjustment is made 7 under this subsection shall be reduced (but not 8 below zero) by the amount of estimated net oper- 9 ating loss taken into account in determining an ad- 10 vance carryback adjustment of the taxpayer under 11 this subsection. 12 (6) RECAPTURE.—The taxpayer’s tax imposed 13 by chapter 1 for such taxable year shall be increased 14 by the excess (if any) of— 15 (A) the reduction in tax for all prior tax- 16 able years by reason of an advance carryback 17 adjustment under this subsection, over 18 (B) the reduction in tax for all prior tax- 19 able years by reason of a net operating loss fi- 20 nally arising in the taxable year to which the 21 application under this subsection relates. 22 (7) DENIAL OF DOUBLE BENEFIT.—The Sec- 23 retary shall provide such rules or guidance as is nec- 24 essary for coordination of the application of this sec- 25 VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 3640 IS tion with the provision of section 6164 of the Inter- 1 nal Revenue Code of 1986. 2 (8) REFERENCES TO SECRETARY.—Any ref- 3 erence to the Secretary of the Treasury in this sub- 4 section shall be treated as including a reference to 5 the Secretary’s delegate. 6 (e) EFFECTIVE DATE.—The amendments made by 7 this section shall take effect as if included in the enact- 8 ment of section 2303(b) of the Coronavirus Aid, Relief, 9 and Economic Security Act. 10 Æ VerDate Sep 11 2014 21:09 May 09, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\S3640.IS S3640 pamtmann on DSKBC07HB2PROD with BILLS