Snowe Revives Bill Extending Tax Carryback for Net Losses

Insurers and other firms that suffer net operating losses in 2008 and 2009 would be permitted to count them against the five prior years of income for tax purposes, under new legislation introduced by Sen. Olympia Snowe, R-Maine.

The NOL Carryback Act, S. 823, would allow firms to claim carryback losses that would call for the refund of taxes paid in recent profitable years. Current tax law allows net operating losses to be used as the basis of refunds for taxes paid in the past two years, or for losses to be counted forward against taxes owed in the following 20 years. The bill would exclude firms that receive assistance from the Troubled Asset Relief Program from being entitled to refunds.

"Carryforward of losses does nothing to help companies weather the current recession. In fact, some of these companies might never be able to take these losses because they'll go out of business as a result of this recession," Snowe said from the Senate floor. "Permitting carryback of losses will help to prevent employees from being laid off today as a result of the credit crunch that continues to exacerbate the downward spiral of our economy."

It would revive on a stand-alone basis a provision that was initially included in a version of the American Recovery and Reinvestment Act that passed the Senate, but was dropped from the final text of the $790 billion stimulus bill. The $54 billion provision, seen as potentially beneficial particularly to financial guaranty, mortgage guaranty insurers and some life insurers, was scaled back to a $947 million carryback, open only to businesses with gross receipts of less than $15 million (BestWire, Feb. 13, 2009).

"The House and Senate and the Obama administration all acknowledged the importance of permitting NOL carrybacks during the debate on the economic stimulus with provisions that generally allowed any company to carryback losses incurred in 2008 and 2009," Snowe said. "Unfortunately, the final agreement on that law did not contain the sweeping provision that is necessary to help as many companies as are in need of this tax relief.

The bill has been referred to the Senate Finance Committee, and is co-sponsored by the panel's chairman, Sen. Max Baucus, D-Mont. Other co-sponsors include Sens. Maria Cantwell, D-Wash.; John Ensign, R-Nev.; Orrin Hatch, R-Utah; Blanche Lincoln, D-Ark.; Bill Nelson, D-Fla.; and Debbie Stabenow, D-Mich.