H.R. 1 — what changed
Tax Cuts and Jobs Act
From Engrossed in House to Placed on Calendar Senate. 1 section amended between Engrossed in House and Placed on Calendar Senate.
Sec. 3302 Modification of net operating loss deduction
Indefinite carryforward of net operating losses— Section 172(b)(1)(A)(ii) is amended by striking “to each of the 20 taxable years” and inserting “to each taxable year”.
Repeal of net operating loss carrybacks other than 1-year carryback of eligible disaster losses—
In general— Section 172(b)(1)(A)(i) is amended to read as follows:
“(i) in the case of any portion of a net operating loss for the taxable year which is an eligible disaster loss with respect to the taxpayer, shall be a net operating loss carryback to the taxable year preceding the taxable year of such loss, and”
Conforming amendments—
Section 172(b)(1) is amended by striking subparagraphs (B) through (F) and inserting the following:
“(B) Eligible disaster loss
“(i) In general—For purposes of subparagraph (A)(i), the term “eligible disaster loss” means—
“(I) in the case of a taxpayer which is a small business, net operating losses attributable to federally declared disasters (as defined by section 165(i)(5)), and
“(II) in the case of a taxpayer engaged in the trade or business of farming, net operating losses attributable to such federally declared disasters.
“(ii) Small business—For purposes of this subparagraph, the term “small business” means a corporation or partnership which meets the gross receipts test of section 448(c) (determined by substituting “$5,000,000” for “$25,000,000” each place it appears therein) for the taxable year in which the loss arose (or, in the case of a sole proprietorship, which would meet such test if such proprietorship were a corporation).
“(iii) Trade or business of farming—For purposes of this subparagraph, the trade or business of farming shall include the trade or business of—
“(I) operating a nursery or sod farm, or
“(II) the raising or harvesting of trees bearing fruit, nuts, or other crops, or ornamental trees.”
Section 172 is amended by striking subsections (f), (g), and (h).
Limitation of net operating loss to 90 percent of taxable income—
In general— Section 172(a) is amended to read as follows:
“(a) Deduction allowed—There shall be allowed as a deduction for the taxable year an amount equal to the lesser of—
“(1) the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, or
“(2) 90 percent of taxable income computed without regard to the deduction allowable under this section.”
Coordination of limitation with carrybacks and carryovers— Section 172(b)(2) is amended by striking “shall be computed—” and all that follows and inserting
“(A) be computed with the modifications specified in subsection (d) other than paragraphs (1), (4), and (5) thereof, and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss year or for any taxable year thereafter,
“(B) not be considered to be less than zero, and
“(C) not exceed the amount determined under subsection (a)(2) for such prior taxable year.”
Conforming amendment— Section 172(d)(6) is amended by striking “and” at the end of subparagraph (A), by striking the period at the end of subparagraph (B) and inserting “; and”, and by adding at the end the following new subparagraph:
“(C) subsection (a)(2) shall be applied by substituting “real estate investment trust taxable income (as defined in section 857(b)(2) but without regard to the deduction for dividends paid (as defined in section 561))” for “taxable income”.”
Annual increase of indefinite carryover amounts— Section 172(b) is amended by redesignating paragraph (3) as paragraph (4) and by inserting after paragraph (2) the following new paragraph:
“(3) Annual increase of indefinite carryover amounts—For purposes of paragraph (2)—
“(A) the amount of any indefinite net operating loss which is carried to the next succeeding taxable year after the loss year (within the meaning of paragraph (2)) shall be increased by an amount equal to—
“(i) the amount of the loss which may be so carried over to such succeeding taxable year (determined without regard to this paragraph), multiplied by
“(ii) the sum of—
“(I) the annual Federal short-term rate (determined under section 1274(d)) for the last month ending before the beginning of such taxable year, plus
“(II) 4 percentage points, and
“(B) the amount of any indefinite net operating loss which is carried to any succeeding taxable year (after such next succeeding taxable year) shall be an amount equal to—
“(i) the excess of—
“(I) the amount of the loss carried to the prior taxable year (after any increase under this paragraph with respect to such amount), over
“(II) the amount by which such loss was reduced under paragraph (2) by reason of the taxable income for such prior taxable year, multiplied by
“(ii) a percentage equal to 100 percent plus the percentage determined under subparagraph (A)(ii) with respect to such succeeding taxable year.”
Effective date—
renumbered
was (6)(3)
Carryforwards and carrybacks— The amendments made by subsections (a) and (b) shall apply to net operating losses arising in taxable years beginning after December 31, 2017.
renumbered
was (6)(4)
Net operating loss limited to 90 percent of taxable income— The amendments made by subsection (c) shall apply to taxable years beginning after December 31, 2017.
renumbered
was (6)(5)
Annual increase in carryover amounts— The amendments made by subsection (d) shall apply to amounts carried to taxable years beginning after December 31, 2017.
renumbered
was (6)(6)
Special rule for net disaster losses— Notwithstanding paragraph (1), the amendments made by subsection (b) shall not apply to the portion of the net operating loss for any taxable year which is a net disaster loss to which section 504(b) of the Disaster Tax Relief and Airport and Airway Extension Act of 2017 applies.