The Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)
Tax Rates - Features
Other Taxes
¶49. Social Security Taxes.
Unemployment Compensation. The temporary 0.2 percent FUTA surtax has been extended. The gross FUTA tax rate of 6.2 percent will apply through June 30, 2011, and will decrease to 6.0 percent for the remainder of calendar year 2011 and thereafter. (Code Sec. 3301, as amended by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)).
Chapter 8: Exclusions From Income
¶863. Fringe Benefits.
The American Recovery and Reinvestment Act of 2009 (P.L.111-5 ) expanded the HAP, effective February 17, 2009, to allow assistance with respect to wounded members of the Armed Forces, wounded civilian Department of Defense and Coast Guard employees, surviving spouses of certain service members and civilian employees killed in the line of duty, and members of the Armed Forces permanently reassigned from an area at or near a military installation to a permanent duty station more than 50 miles away (where the other HAP requirements are also met). Payments made under the expanded HAP are eligible for exclusion. (Code Sec. 132(n) , as amended by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L.111-92 )).
Chapter 11: Losses
¶1173. Application of Net Business Loss.
In light of the special extended carryback period allowed for 2008 and 2009 NOLs (see ¶1179), an application for a tentative carryback adjustment regarding an NOL for a tax year ending before November 6, 2009, is timely if filed before the return due date (including extensions) for the taxpayer's last tax year beginning in 2009 (Act Sec. 13(e)(4) of the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)).
¶1179. Carryover and Carryback.
Generally, net operating losses can be carried back to the two years preceding the loss year and then forward to the 20 years following the loss year. Further, for net operating losses that arose in tax years beginning before August 6, 1997, taxpayers could have carried back an NOL to the three years preceding the loss year and then forward to 15 years following the loss year. No deduction is allowed in the year the loss is incurred (Code Sec. 172(b); Reg. §1.172-4). A three-year carryback period is retained for an “eligible loss,” which is the portion of an NOL that: (1) relates to casualty and theft losses of individual taxpayers; or (2) is attributable to federally declared disasters (see ¶1137) in the case of a small business or a farming business. An “eligible loss” for this purpose does not include a farming loss or a qualified disaster loss (see “Farming Loss” and “Federally Declared Disasters” below) (Code Sec. 172(b)(1)(F)). If a taxpayer has elected to use the special extended carryback period allowed for 2008 and 2009 NOLs, the three-year carryback provision for “eligible losses” will not apply. See “Extended Carryback for 2008 and 2009 NOLs,” below.
Election to Forgo Carryback. A taxpayer may elect to waive the entire carryback period (Code Sec. 172(b)(3)). If this election is made, the loss may be carried forward only. The election must be made by the return due date (including extensions) for the tax year of the NOL. The election may also be made on an amended return filed within six months of the due date of an original timely return (excluding extensions). Refer to the instructions for Form 1139, Corporation Application for Tentative Refund, or Form 1045, Application for Tentative Refund, for specific statement requirements. Once made, the election is irrevocable; however, in light of the special extended carryback period allowed for certain 2008 and 2009 NOLs, the election to forgo carryback of an NOL for a tax year ending before November 6, 2009, can be revoked before the return due date (including extensions) for the taxpayer's last tax year beginning in 2009 (Act Sec. 13(e)(4) of the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)); see “Extended Carryback for 2008 and 2009 NOLs,” below).
Extended Carryback for 2008 and 2009 NOLs. A taxpayer can elect a three-, four- or five-year carryback period (instead of the normal two years) for its NOL for any tax year that ends after December 31, 2007, and begins before January 1, 2010 (Code Sec. 172(b)(1)(H), as amended by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)). Most taxpayers can make the election for only one tax year (2008 or 2009); eligible small businesses (defined below) may be able to elect an extended carryback period for 2008 and 2009 NOLs. If a taxpayer has elected to use the extended carryback period for 2008 or 2009 NOLs, then the three-year carryback period for “eligible losses” (i.e., casualty or theft losses of individuals, NOLs of farmers or small businesses from federally declared disasters) will not apply.
The election must be made by the return due date (including extensions) for the taxpayer's last tax year beginning in 2009. Once an election is made, it cannot be revoked. The IRS will set forth the procedure for making a valid election. (Detailed procedures exist for the election for 2008 NOLs of eligible small businesses under the prior extended carryback provision (Rev. Proc. 2009-26).)
If the taxpayer elects to use a five-year carryback period, the NOL amount that can be carried back to the fifth tax year cannot exceed 50 percent of the taxpayer's taxable income for such preceding tax year (computed without regard to the NOL for the loss year or any tax year thereafter). In determining the amount of carrybacks and carryovers to other tax years, adjustments must be made to account for the 50-percent limitation. The 50-percent limitation does not apply if an eligible small business made a five-year carryback election under the prior carryback provision for an NOL for a tax year beginning or ending in 2008 (Code Sec. 172(b)(1)(H)(iv), as amended by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)).
Eligible small businesses that made or make the election to carry back a 2008 NOL for three, four or five years under the prior carryback provision can also make an election for a 2009 NOL; thus, eligible small businesses can make the election for two tax years (2008 and 2009) (Code Sec. 172(b)(1)(H)(v), as amended by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)). An “eligible small business” is a one that meets a $15 million (or less) gross receipts test for the tax year in which the loss arose; the test is based on the gross receipts test in Code Sec. 448(c). If an eligible small business did not make a timely election for a 2008 NOL under the prior carryback provision, then it can only make an election under the amended carryback provision for a 2008 or a 2009 NOL. In such case, the 50-percent of taxable income limitation (described above) will apply to the NOL carried back to the fifth tax year preceding the loss year (Joint Committee on Taxation, Technical Explanation of Certain Revenue Provisions of the Worker, Homeownership, and Business Assistance Act of 2009 (JCX-44-09), November 3, 2009).
Certain taxpayers participating in the Troubled Asset Relief Program (TARP) cannot elect the extended carryback period for applicable 2008 or 2009 NOLs (Act Sec. 13(f) of the 2009 Worker Act).
Corporate Equity Reduction Transactions (CERTs) . A C corporation may not carry back a portion of its NOL if $1 million or more of interest expense is incurred in a “major stock acquisition” of another corporation or in an “excess distribution” by the corporation (Code Sec. 172(b)(1)(E) and (h)). The amount subject to the limitation is the lesser of: (1) the corporation's deductible interest expense allocable to the CERT or (2) the amount by which the corporation's interest expense for the current tax year exceeds the average interest expense for the three tax years preceding the tax year in which the CERT occurs. The portion of the NOL that cannot be carried back may be carried forward. If an eligible corporation has elected to use the three-, four- or five-year carryback period for its applicable 2008 or 2009 NOL (see “Extended Carryback for 2008 and 2009 NOLs,” above), special rules apply (Code Sec. 172(b)(1)(H)(i)(II), as amended by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)).
Chapter 25: Returns: Payments of Tax
¶2503. Electronic Filing.
For income tax returns of individuals, estates, or trusts (i.e., individual income tax returns) filed after December 31, 2010, the IRS must require filing on magnetic media if the return is prepared and filed by a specified tax return preparer for the calendar year during which the return is filed. With respect to any calendar year, a “specified tax return preparer” means any tax return preparer (see ¶2517), unless the preparer reasonably expects to file 10 or fewer individual income tax returns during the calendar year (Code Sec. 6011(e)(3), as added by the Worker, Homeownership, and Business Assistance Act of 2009 (P.L. 111-92)).
