If a carryback application/claim is received from a financial institution, and the IDRS/Master File tax module (loss or gain years) has a TC 971 with AC 076 (-W freeze), this indicates that the Federal Deposit Insurance Corporation (FDIC) has been appointed as receiver/fiduciary for the financial institution. In most instances, the common parent is filing the carryback and the financial institution in receivership is a subsidiary of the consolidated return. Regardless, both the common parent and the subsidiary financial institution will have the TC 971 AC 076 posted to the relevant tax modules. Also note, the entity module of the financial institution (but not of the common parent) will include the FDIC on the secondary name line. The FDIC files Form 56-F, Notice Concerning Fiduciary Relationship of Financial Institution, with the IRS. BMF Entity processes Forms 56-F. See IRM 3.13.2.18.4, Processing Form 56-F, Notice Concerning Fiduciary Relationship of Financial Institution, and IRM 3.13.2.18.5, Processing Form 56-F.

Form 1139 - If a Form 1139, Corporation Application for Tentative Refund, is received and the conditions in Paragraph (1) apply, ensure there are two signatures present; one by the FDIC as receiver/fiduciary for the institution and one by the common parent of the carryback year consolidated group. If the Service has been notified via Form 56-F that the FDIC is a receiver/fiduciary, Treas. Reg. § 301.6402-7(e)(2) requires that any Form 1139 must be signed by both the common parent of the carryback year group and the fiduciary.

Form 1120X - The regulations under Treas. Reg. § 301.6402-7(e)(1) do not have a similar dual signature requirement for a carryback refund claim filed on Form 1120X, Amended U.S. Corporation Income Tax Return. A carryback refund claim may be filed by either the FDIC as receiver/fiduciary for the institution or by the common parent for the consolidated carryback year under the regulation. Thus, two Forms 1120X may be filed regarding the same refund. A claim filed by the FDIC will have the following header: "Claim for refund under IRC 6402(k)." However, a claim filed by the common parent will not have any header. In addition, under Treas. Reg. 301.6402-7(e)(3) in conjunction with seeking a carryback refund, the FDIC as receiver/fiduciary might also file a loss year return with respect to the loss year consolidated group, if the common parent does not file one or the FDIC does not accept the loss year consolidated return filed by the common parent. Accordingly, refer all carryback refund claims (Forms 1120X) from financial institutions in receivership to Exam Classification as CAT-A. See IRM Exhibit 21.5.3-2, Examination Criteria (CAT-A) – General.

Beginning with tax year 2008, corporations can file carrybacks electronically using the Modernized e-File (MeF) system by filing Form 1120X and marking a "Y" in the carryback checkbox. The following paragraphs describe the unique procedures used to identify and route these MeF carryback cases to the Ogden Carryback Team(s) in a timely manner, so that the carrybacks can be processed, and refunds issued, within the 45-day interest-free period.

MeF ad hoc reports, for all amended MeF returns received, are generated by the Ogden AM MeF Coordinator each Tuesday for the previous week's data (Sun - Sat). The report is sorted by the following categories:

No special actions are taken for the amended 1120S and 1065 returns portion. These returns generate MeF DUPF cases and are worked following normal CIS processing procedures.

A listing of all 1120X carrybacks (those with a "Y" in the carryback checkbox) is forwarded directly to a designated carryback manager to be worked by carryback employees.

A listing of the 1120X amended returns is forwarded to a designated AM team to be worked. Any carryback amended returns identified by this team are forwarded directly to the designated carryback manager to be worked by carryback employees.

MeF amended returns post 1-2 cycles prior to the posting of the CP/TRNS 193 and -A freeze on IDRS. Trained employees work the amended returns and carryback cases and input No Source Document (NSD) TC 29X adjustments or route, as appropriate, according to IRM requirements prior to the CP/TRNS 193 and -A freeze generation.

When inputting the adjustment, employees input "MEFEUP193" as the adjustment activity and "MISC" as the IDRS category code. For carryback cases, use IDRS category code "TENT" or "RINT," as appropriate.

MeF trained employees will create a CIS case with the following information:

Use the received date from the ad hoc report. Suspend the CIS case in Monitor status for 14 days or until the CIS TRNS193 case is created. CIS TRNS193 cases are created by IDRS CP/TRNS 193s. CIS recognizes that a same TIN case is active and assigns the new case to the employee who created the case.

Once the CIS TRNS193 case has been created and associated, the employee links the cases together on CIS and closes both CIS cases to complete processing. There may be instances when the CIS TRNS193 case does not correctly associate to the employee. A CIS TIN search may be necessary.

For more information about Modernized e-File, see e-file for Large and Mid-Size Corporations, located on the IRS.gov Website.

Sections 2013 and 2012 of The Small Business Jobs Act (SBJA) of 2010 change the treatment of most general business credits of "eligible small businesses" (ESB's) for the first tax year beginning in 2010 (tax years ending 201012 thru 201111). IRC §§ 38 and 39 (which govern general business credits and the carryback of such credits) were amended as follows:

An election statement is not required. The Internal Revenue Code requires an ESB to carry the credits back for five years. The normal statutory periods for filing carryback applications and carryback claims applies.

General business credits that qualify as ESBC's (as long as the entity qualifies as an ESB) are those listed in IRC § 38(b).

ESBC's can be carried back to offset tax in earlier years, even if a specific credit was not in effect in the earlier year.

Taxpayers that do not meet the requirements of an ESB, carry back their unused general business credits for one year and forward 20 years, per normal procedures.

The Office of Servicewide Interest has identified an issue with some IMF and BMF computer-generated carryback refunds. In certain instances, credit interest is generating when the refund is issued within the 45-day interest-free period.

Until further notice, follow the steps below prior to input of a carryback adjustment.

After its amendment by the General Agreement on Tariffs and Trade (GATT), IRC § 6621(a)(1) established two rates of interest for interest accruing after December 31, 1994, on corporate overpayments - one to be applied to the extent that a corporate overpayment for a tax period is less than or equal to $10,000 (the corporate rate) and the other, an even lower rate, to be applied to the extent that such an overpayment for a taxable period exceeds $10,000 (the GATT rate).

If a CSR/TE is preparing a manual refund for a corporate account, such as Form 1120, the corporate and GATT rates must be considered in the computation of any overpayment interest. See IRM 20.2.4.9,Special Credit Interest Rules for Corporations, and subsequent subsections, for detailed instructions.

The Job Creation and Worker Assistance Act of 2002 provided a 5-year carryback period (from 2 years, or 3 years in certain cases) for net operating losses for any taxable year ending during 2001 and 2002. The Act also allowed a NOL carried back from or carried forward to taxable years ending in 2001 and 2002, to offset 100 percent (from 90 percent) of a taxpayer's Alternative Minimum Taxable Income (AMTI).

The 5-year carryback provision was effective for NOLs generated in taxable years ending after December 31, 2000. The provision allowing the use of NOL carrybacks and carryforwards to offset 100 percent of AMTI was effective for taxable years ending before January 1, 2003.

Section 403(b)(2) of the Working Families Tax Relief Act of 2004 provided qualifying taxpayers who filed returns for a taxable year, ending during 2001 and 2002 without taking advantage of the 5-year carryback with a limited opportunity to do so and to apply for a tentative carryback adjustment, if they acted on or before October 31, 2002.

If the taxpayer had already filed his Form 1139 or Form 1045, and the 12 month ending date had passed for the filing of his tentative application, then the taxpayer must have filed an amended application (Form 1139 or Form 1045) by October 31, 2002, to claim the 5-year carryback. Taxpayer must have typed or printed across the top of the application form, "Amended refund claim pursuant to Rev. Proc. 2002-40."

A taxpayer could elect to forgo the 5-year carryback period and carry the entire NOL forward for 20 years. This law allowed taxpayers who previously elected to forgo their NOL carryback period, to revoke their election in order to apply the 5-year carryback period. Also, taxpayers who used a 2-year carryback period for a NOL ending in 2001 or 2002, could file an application/amended return based upon a 5-year NOL carryback, provided these requests were filed by October 31, 2002.

If a taxpayer elected to forgo the carryback period for a NOL incurred in 2001 or 2002 and did not want to revoke that election in order to use the 5-year carryback period, the taxpayer need not file any additional form or statement.

This law allowed taxpayers who filed returns for a taxable year ending in 2001 or 2002, and who neither elected to forgo the carryback period, nor used the 2-year carryback, to relinquish the 5-year carryback period (and thereby retain the ability to use the 2-year carryback period) if they acted on or before October 31, 2002.

If a taxpayer previously filed a tentative carryback or amended return using a 2-year carryback period for a NOL incurred in a taxable year ending in 2001 or 2002, preferred to apply the 2-year carryback period rather than the 5-year carryback period, the taxpayer need not file any form or statement in order to satisfy the requirements to forgo the 5-year carryback period.

Taxpayers who incurred a NOL in 2001 or 2002 and did not forgo the carryback period or file for a tentative carryback adjustment or an amended return adjustment, using a 2-year carryback, could have applied the 2-year carryback period in lieu of the 5-year carryback, by filing an amended application or amended return on or before October 31, 2002.

Carrybacks filed under the Job Creation and Workers Assistance Act of 2002 were processed using the following instructions:

Generally, if a claim attributable to a NOL arising in a tax year ending in 2001 or 2002 was not filed prior to November 1, 2002, the NOL had to be carried back to the 5th preceding tax year before the loss year, except taxpayers who elected a loss carryback of 2 years (3 years to the extent it was a casualty or disaster loss; or 5 years to the extent it was a farming loss).

The 2 or 3-year carryback loss could be claimed by attaching a statement to the 2001 or 2002 income tax return, filed by the due date (including extensions), electing to disregard the 5-year carryback. If the original return was filed by the due date, an election could be made on an amended return filed within 6 months after the due date of the return (excluding extensions). Taxpayers should have indicated on the election statement, "Filed pursuant to section 301.9100-2" and attached it to the amended return.

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Refer to Publication 4492, Information for Taxpayers Affected by Hurricanes Katrina, Rita, and Wilma, for GO Zone carryback net operating loss information for taxpayers who were affected by those disasters

IRC § 1400N(k) allows a 5-year carryback for Net Operating Losses (NOLs) that are qualified GO Zone losses, and is effective for taxable years ending on or after 8-28-05. A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone, except for certain property described in Section 1400N(p)(3), if the loss was caused by Hurricane Katrina. Section 1231 property is property used in a trade or business.

The 5-year GO Zone net operating loss carryback does not apply to personal casualty losses. Individuals with a personal casualty loss sustained in a presidentially declared disaster area are subject to a 3-year carryback period for eligible losses.

If a taxpayer has a GO Zone loss in 2005 or a subsequent taxable year that includes a casualty loss, and the taxpayer elects to forgo the 5-year carryback for GO ZONE losses, then the casualty loss portion of the NOL is not treated as an eligible loss that the taxpayer can carry back 3 years under IRC § 172 (b)(i)(F). The normal 2-year NOL carryback period will apply instead, unless the taxpayer elects to forgo all carryback periods under IRC § 172 (b)(3).

When there is a situation where the taxpayer has no NOL in 2005 or a subsequent taxable year, but has a casualty loss attributable to Hurricane Katrina, the taxpayer can elect, under IRC 165(i), to treat the loss as occurring in the preceding taxable year. If a Hurricane Katrina casualty loss offsets positive taxable income in part and in part contributes to the generation of a NOL, the taxpayer can also elect, under IRC 165(i) to treat the casualty loss as occurring in the preceding taxable year. The taxpayer cannot make an IRC 165(i) election for a Hurricane Katrina 2005 casualty loss if the entire amount of that loss is used to generate a GO Zone loss. Should the taxpayer elect to take the casualty loss in 2004 and the loss is part of a NOL for 2004, the casualty loss portion of the 2004 NOL is treated as an eligible loss, and the 3-year NOL carryback would then apply.

The Food, Conservation, and Energy Act of 2008 provides tax relief for taxpayers in Iowa County, Kansas, and surrounding areas, who were affected by the storms and tornadoes that began on May 4, 2007. Generally, taxpayers can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. However, the portion of a NOL that is a "qualified recovery assistance loss" can be carried back to the 5 tax years before the NOL year.

In addition, the 90 percent limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. Taxpayers in the affected areas who previously filed their 2007 tax returns and carried back the loss for 2 years can file an amended return to carry back for 5 years a NOL attributable to a qualified recovery assistance loss. See Publication 4492–A, Information for Taxpayers Affected by the May 4, 2007, Kansas Storms and Tornadoes, for detailed information.

HR 1424 (Public Law 110-343), Section 702, provides tax relief for victims of the Midwestern Disaster Area. The Midwestern disaster area is restricted to the states of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska and Wisconsin for areas that have been presidentially declared as eligible for federal relief on or after May 20, 2008, and before August 1, 2008, by reason of severe storms, tornadoes, or flooding occurring in those states.

The legislative acts are similar to those provided by GO Zone. See IRM 21.5.9.5.14.2. The portion of a Net Operating Loss (NOL) that is a "qualified disaster recovery assistance loss" can be carried back to the 5 tax years before the NOL year.

A qualified disaster recovery assistance casualty loss is any deductible section 1231 loss of property located in a Midwestern disaster area if the loss was caused by the severe storms, tornadoes, or flooding. Section 1231 property is property used in a trade or business. In addition, the 90 percent limit on alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. See Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Area, for detailed information.

The National Disaster Relief Act of 2008, Subtitle B of Title VII of the Emergency Economic Stabilization Act of 2008, signed into law on Oct. 3, 2008, as Public Law 110-343, provides tax relief for victims of federally declared disasters occurring after Dec. 31, 2007 and before Jan. 1, 2010. Areas declared by the President to be eligible for federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act qualify as federally declared disasters.

Section 708 of the National Disaster Relief Act allows taxpayers to carry back a "qualified disaster loss" 5 years. A qualified disaster loss is the lesser of the taxpayer’s net operating loss for the taxable year or the sum of the following:

Section 708 provides that the 90 percent limit does not apply to the portion of the AMT net operating loss deduction attributable to a qualified disaster loss.

Section 712 provides that these changes to the law do not apply to the Midwestern disaster areas declared during the period beginning on May 20, 2008, and ending on July 31, 2008. See Publication 4492-B, Information for Affected Taxpayers in the Midwestern Disaster Area, for information on specific relief provided to these taxpayers.

Taxpayers may elect, by attaching a statement to their timely filed income tax return, to figure a qualified disaster carryback without regard to the special 5-year carryback rule. The election must be made by the due date, extended due date, or within 6 months after the due date (per Section 301.9100-2 of the regulations) of a timely filed loss year return. Once made, the election is irrevocable.

See Declared Disasters by Year or State on the Federal Emergency Management Agency (FEMA) Website for a listing of federally declared disaster areas.

The American Recovery and Reinvestment Act (ARRA) of 2009 was signed into law on February 17, 2009 as Public Law 111-5. Section 1211 provides an extended carryback period for "eligible small businesses" sustaining a net operating loss in tax year 2008. See IRM 21.5.9.5.14.6.1 for the definition of an eligible small business.

The provision allows taxpayers that are "eligible small businesses" to elect a 3, 4, or 5-year carryback period for a 2008 Net Operating Loss (NOL). If an eligible small business is a pass-through entity such as a partnership or S-Corp, partners or shareholders are allowed to elect an extended carryback period for a 2008 NOL that stems from the loss generated by such eligible small business. Pass-through entities are not taxable entities, cannot have a NOL, and cannot make the election. See IRM 21.5.9.5.14.6.1 for the definition of an eligible small business.

The provision applies to net operating losses arising in taxable years ending after December 31, 2007.

Calendar year filers can only make this election for their 200812 tax year. See IRM 21.5.9.5.14.6.2 for information on late filed elections for calendar year filers.

Fiscal year filers may elect the extended carryback period for one tax year that either begins in 2008 or ends in 2008. See IRM 21.5.9.5.14.6.3 for additional information on fiscal year filers.

Taxpayers make the election in one of two ways. The first method is with the loss year return or the amended loss year return. The second method is with the appropriate form (1045, 1139, 1040X, 1120X, etc.).

Method 1 - Taxpayers make the election by attaching a statement to their timely filed 2008 return. Per Revenue Procedures (Rev. Proc.) 2009-19 and -26, the statement must clearly state that the taxpayer is electing to apply §172(b)(1)(H) and include the carryback period they are electing (3, 4, or 5-years).

The election must be made by the due date (or extended due date) of the loss year return, or, if the taxpayer files a timely loss year return without making the election, the taxpayer may make the election on an amended loss year return filed within six months of the normal due date (excluding extensions). See Section 301.9100-2 of the regulations. In the case of a taxable year ending after December 31, 2007, but before February 17, 2009, the election will be treated as timely made if filed on or before April 17, 2009, even if the loss year return due date has passed.

Once the election is made, it is irrevocable.

Method 2 - If the taxpayer does not make the election on the loss year return or amended return, the second way the taxpayer may make the election is by filing the appropriate form (1045, 1139, 1040X, 1120X, etc.) applying the NOL carryback period the taxpayer chooses (3, 4, or 5 years) for the earliest taxable year to which the NOL may be carried pursuant to the election. Under Rev. Proc. 2009-26, no statement or label is required on the form to make the election. To make the election, the taxpayer must file the appropriate form on or before the later of the date that is 6 months after the due date (excluding extensions) for filing the taxpayer's return for the taxable year of the applicable 2008 NOL or April 17, 2009.

If an eligible small business entity (or a taxpayer who has a pass-through loss from eligible small business entities) does not wish to elect the extended carryback period, the entity (of the taxpayer) can claim the normal 2-year carryback period. There is no requirement to waive the extended period. Process carryback applications claiming the normal 2-year carryback period in the normal manner.

Rev. Proc. 2009-26 provides taxpayers with instructions on when and how to file for the extended carryback loss under ARRA 2009, Section 1211. The IRS also posted Questions and Answers for ARRA - Section 1211 5-year Net Operating Loss Carryback Election for Small Businesses which provides answers to common questions taxpayers may have and may also be useful when answering taxpayer calls. A News Release, IR-2009-26, March 16, 2009, was also issued to the public.

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When sending any letter, remember to capture the "request completed" screen for CC LETER. See IRM 21.5.1.5.1(7), CIS General Guidelines.

To ensure consistent processing of ARRA 2009, Section 1211 claims, follow the processing steps, in the order shown, in IRM 21.5.9.5.14.6.9.

See IRM 21.5.9.5.14.6.6.1 before rejecting or disallowing any Section 1211 carryback application or claim due to timeliness of the election.

The Worker, Homeownership, and Business Assistance Act (WHBAA) of 2009, signed into law on November 6, 2009, amended IRC § 56(d)(1)(A)(ii)(I), removing the 90 percent limitation of Alternative Tax Net Operating Loss Deduction (ATNOLD) for periods ending after Dec. 31, 2002 for Alternative Tax Net Operating Loss (ATNOL) for which taxpayers make an election under IRC § 172(b)(1)(H). This affects both ARRA and WHBAA carrybacks. See IRM 21.5.9.5.14.6.10.