IRS Clarifies Ordering Rules For Alternative Tax NOLs

The IRS has released field attorney advice (FAA 20144201F) clarifying the ordering rules for alternative tax net operating losses (ATNOLs), including ATNOLs from years in which a taxpayer made a valid election under Section 172(b)(1)(H) for an extended carryback of 2008 and 2009 losses (WHBAA election).

Section 172 generally allows taxpayers computing their regular income tax liability to take a deduction for NOLs. Under section 172(b)(1)(A), taxpayers may carry back a NOL to the two preceding years and carry it forward for succeeding 20 taxable years. Under the WHBAA election, a taxpayer could extend the normal two-year carryback period to a period of up to five years. Under Section 172(b)(2), NOLs from earlier years are absorbed before NOLs from later years.