rp-21-14.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.105: Examination of returns and claims for refund, credit or abatement;
determination of correct tax liability.
(Also Part I. § 172)

Special elections for taxpayers with Farming Loss NOLs

Rev. Proc. 2021-14

SECTION 1. PURPOSE

.01 This revenue procedure provides guidance regarding elections and revocations
related to § 2303(e) of the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act), Public Law 116-136, 134 Stat. 281 (Mar. 27, 2020), as added by § 281 of the
COVID-related Tax Relief Act of 2020 (CTRA 2020), which was enacted as Subtitle B of
Division N of the Consolidated Appropriations Act, 2021 (CAA 2021), Public Law 116-
260, 134 Stat. 1182 (Dec. 27, 2020). Section 2303(e) of the CARES Act provides
special rules for taxpayers with a net operating loss (NOL) for any taxable year
beginning in 2018, 2019, or 2020, all or a portion of which consists of a “farming loss,”

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as defined by § 172(b)(1)(B)(ii) of the Internal Revenue Code (Code) (Farming Loss
NOL).
.02 Specifically, this revenue procedure prescribes when and how to make an
election with regard to all NOLs of the taxpayer, regardless of whether the NOL is a
Farming Loss NOL. This revenue procedure also provides that a taxpayer is treated as
having made a deemed election under § 2303(e)(1) of the CARES Act if the taxpayer,
before December 27, 2020, filed one or more original or amended Federal income tax
returns, or applications for tentative refund, that disregard the CARES Act Amendments
with regard to a Farming Loss NOL. This revenue procedure further prescribes when
and how to revoke an election made under § 172(b)(1)(B)(iv) or § 172(b)(3) of the Code
to waive the two-year carryback period for the farming loss portion of a Farming Loss
NOL incurred in a taxable year beginning in 2018 or 2019.
SECTION 2. BACKGROUND
.01 TCJA Modifications of NOL Deduction and NOL Carryback Rules--(1) Enactment
of 80-percent Limitation. Section 13302(a)(1) of Public Law 115-97, 131 Stat. 2054
(Dec. 22, 2017), commonly referred to as the Tax Cuts and Jobs Act (TCJA), amended
§ 172(a)(2) of the Code to provide that, with regard to NOLs arising in a taxable year
beginning after December 31, 2017, the amount allowed as a “net operating loss
deduction,” as defined in § 172(a) (NOL deduction), cannot exceed 80 percent of the
taxable income of the taxpayer computed without regard to any NOL deduction (80-
percent limitation). The 80-percent limitation does not apply in the case of an insurance
company, as defined in § 816(a), other than a life insurance company. See § 172(f) (as
added by § 13302(d)(2) of the TCJA).

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(2) Two-year carryback period for farming losses. Section 13302(b) of the TCJA
amended § 172(b)(1) of the Code to generally eliminate NOL carrybacks. However,
§ 13302(c)(1) of the TCJA amended § 172(b)(1) to provide a two-year carryback period
for the portion of an NOL that is a farming loss. Section 13302(c)(1) of the TCJA further
amended § 172(b)(1) to provide that taxpayers entitled to this two-year carryback period
may make an irrevocable election to waive it. See § 172(b)(1)(B)(iv). In addition,
§ 172(b)(3), which predates the TCJA amendments, separately provides that any
taxpayer entitled to an NOL carryback period under § 172(b)(1) may irrevocably elect to
relinquish the entire carryback period with respect to that NOL for any taxable year.
The TCJA changes relating to loss carrybacks apply to NOLs arising in taxable years
beginning after December 31, 2017. See § 13302(e)(2) of the TCJA, as amended by
§ 2303(c)(1) of the CARES Act.
.02 CARES Act Amendments to TCJA 80-percent Limitation and NOL Carryback
Rules--(1) Temporary suspension of 80-percent limitation. Section 2303(a) of the
CARES Act amended § 172(a) of the Code to provide that the 80-percent limitation
applies only to NOLs arising in taxable years beginning after December 31, 2017, that
are deducted in taxable years beginning after December 31, 2020.
(2) Five-year carryback periods. Section 2303(b) of the CARES Act amended
§ 172(b)(1) of the Code to provide a five-year carryback period for any NOL arising in a
taxable year beginning after December 31, 2017 and before January 1, 2021. See
§ 172(b)(1)(D). Section 172(b)(1)(D)(i)(II), as added by section 2303(b) of the CARES
Act, provides, in part, that the two-year carryback period provided by § 172(b)(1)(B) for
farming losses does not apply to any such NOL.

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.03 CTRA 2020 Amendments to CARES Act. Section 281(a) of the CTRA 2020
amended § 2303 of the CARES Act by adding a new subsection (e), which took effect
as if originally included in that CARES Act section. See § 281(b) of the CTRA 2020.
New § 2303(e) of the CARES Act contains the following provisions:
(1) Election to disregard the CARES Act Amendments. Section 2303(e)(1) of the
CARES Act provides that a taxpayer with a Farming Loss NOL for any taxable year
beginning in 2018, 2019, or 2020, may make an election to disregard the amendments
made by section 2303(a) and (b) of the CARES Act (that is, the CARES Act
Amendments).
(2) Consequences of Election. If a taxpayer makes the election under
§ 2303(e)(1), the following consequences will result:
(a) Application of 80-percent limitation. The 80-percent limitation will apply to
determine the NOL deduction for each taxable year beginning in 2018, 2019, or 2020 to
the extent the deduction is attributable to NOLs arising in taxable years beginning after
December 31, 2017. The 80-percent limitation will not apply to determine the NOL
deduction for any taxable year beginning before 2018.
(b) Application of modified taxable income rules. Section 172(b)(2)(C) of the
Code, as added by the TCJA and effective prior to enactment of the CARES Act,
provides a modified taxable income rule to account for the 80-percent limitation. This
rule will apply with regard to each taxable year beginning in 2018, 2019, or 2020.
(c) NOL carryback period. The NOL carryback period will be determined under
§ 172(b) of the Code, as amended by the TCJA and effective prior to enactment of the
CARES Act, for any NOL arising in any taxable year beginning in 2018, 2019, or 2020.

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For example, if a taxpayer with a Farming Loss NOL in 2018 makes the election under
§ 2303(e)(1), only the portion of the Farming Loss NOL that consists of a farming loss
can be carried back two taxable years. In addition, for taxpayers other than insurance
companies, as defined in section 816(a) of the Code, that are not life insurance
companies, no portion of any NOL that does not constitute a farming loss can be carried
back to any taxable year beginning before January 1, 2018.
(3) Making the Election--(a) Overview. Section 2303(e)(1)(B)(i) of the CARES Act
provides that, except in the case of a deemed election described in 3.02(3)(b) of this
revenue procedure, an election to disregard the CARES Act amendments (Affirmative
Election) under § 2303(e)(1) must be made in the manner prescribed by the Secretary.
Once made, an election under § 2303(e)(1) is irrevocable. Section 2303(e)(1)(B)(ii)(I) of
the CARES Act generally provides that an Affirmative Election must be made by the due
date, including extensions of time, for filing the taxpayer’s Federal income tax return for
the taxpayer’s first taxable year ending after December 27, 2020.
(b) Deemed election. In the case of any taxpayer with a Farming Loss NOL that
files a Federal income tax return before December 27, 2020, that disregards the
CARES Act Amendments, the taxpayer is treated as having made a deemed election
(Deemed Election) under § 2303(e)(1) unless the taxpayer amends such return to
reflect such amendments by the due date (including extensions of time) for filing the
taxpayer’s Federal income tax return for the first taxable year ending after December
27, 2020.
(4) Revocation of election to waive two-year carryback period. Section 2303(e)(2)
of the CARES Act provides taxpayers with the ability to revoke an election made under

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§ 172(b)(1)(B)(iv) or § 172(b)(3) of the Code to waive the two-year carryback period if
the election--
(i) was made by the taxpayer before December 27, 2020; and
(ii) relates to the two-year carryback period for the portion of any Farming Loss
NOL that is a farming loss arising in taxable years beginning in 2018 or 2019.
SECTION 3. ELECTIONS TO DISREGARD CARES ACT AMENDMENTS
.01 Affirmative Election--(1) Overview. A taxpayer with a Farming Loss NOL, other
than a taxpayer making a Deemed Election described in section 2.03(3)(b) of this
revenue procedure, may make an Affirmative Election under section 2303(e)(1) of the
CARES Act if--
(a) the Farming Loss NOL arose in any taxable year of the taxpayer beginning in
2018, 2019, or 2020; and
(b) the taxpayer satisfies all of the conditions described in section 3.01(2) of this
revenue procedure.
(2) Time and manner for making an Affirmative Election. To make a valid
Affirmative Election under section 3.01(1) of this revenue procedure, a taxpayer must
satisfy the following conditions:
(a) Election deadline. The taxpayer must make the Affirmative Election on a
statement described in section 3.01(2)(b) of this revenue procedure by the due date,
including extensions of time, for filing the taxpayer’s Federal income tax return for the
taxpayer’s first taxable year ending after December 27, 2020.
(b) Required statement. The taxpayer must attach a statement to the taxpayer’s
Federal income tax return for the taxpayer’s first taxable year ending after December

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27, 2020. The statement must provide in type or legible writing at the top of the
statement the following: “The taxpayer elects under § 2303(e)(1) of the CARES Act and
Revenue Procedure 2021-14 to disregard the amendments made by § 2303(a) of the
CARES Act for taxable years beginning in 2018, 2019, and 2020, and the amendments
made by § 2303(b) of the CARES Act that would otherwise apply to any net operating
loss arising in any taxable year beginning in 2018, 2019, or 2020. The taxpayer
incurred a Farming Loss NOL, as defined in section 1.01 of Revenue Procedure 2021-
14, in [list each applicable taxable year beginning in 2018, 2019, or 2020].” The
taxpayer should also attach a copy of the statement to any original or amended Federal
income tax return or application for tentative refund on which the taxpayer claims a
deduction attributable to a two-year NOL carryback pursuant to the Affirmative Election.
.02 Deemed Election--(1) Overview. Except as provided in section 3.02(3) of this
revenue procedure, a taxpayer is treated as having made a Deemed Election under
section 2303(e)(1) of the CARES Act if the taxpayer, before December 27, 2020, filed
one or more original or amended Federal income tax returns, or applications for
tentative refund, that disregard the CARES Act Amendments with regard to a Farming
Loss NOL.
(2) Special procedure for certain taxpayers whose two-year carryback claims filed
before December 27, 2020 were rejected. Some taxpayers may have had their two-
year carryback claims, as reflected on their applications for tentative refund or claims for
refund that were filed before December 27, 2020, rejected by the Internal Revenue
Service (IRS). If such a taxpayer wants to continue to pursue those claims, the
taxpayer should submit complete copies of their rejected applications or claims,

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including the original or amended Federal income tax returns for the taxable years in
which the NOLs arose, in the manner set forth in this section 3.02(2), which will enable
the IRS to review their cases as expeditiously as possible.
(a) The taxpayer should submit a complete copy of each rejected application for
tentative refund or claim for refund based on a two-year carryback period, including the
original or amended Federal income tax return for the taxable year in which the NOL
arose, to the IRS Service Center at which the taxpayer previously filed the application or
claim and return.
(b) The taxpayer should provide in type or legible writing at the top of the first
page of a complete copy of each application or claim the following: "Deemed Election
under section 3.02(2) of Revenue Procedure 2021-14."
(c) The complete copy of each application or claim and return should be
submitted on or before the due date, including extensions of time, for filing the
taxpayer’s Federal income tax return for the taxpayer’s first taxable year ending after
December 27, 2020.
(3) Exception to Deemed Election. A taxpayer will not be treated as having made
a Deemed Election if, for each taxable year for which the taxpayer filed an original or
amended Federal income tax return or an application for tentative refund that treated a
Farming Loss NOL in a manner that disregards the CARES Act Amendments, the
taxpayer subsequently files either an amended return by the due date, including
extensions of time, for filing the taxpayer’s Federal income tax return for the taxpayer’s
first taxable year ending after December 27, 2020, or an application for tentative refund
within the required time for filing such an application and also by the due date, including

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extensions of time, for filing the taxpayer’s Federal income tax return for the taxpayer’s
first taxable year ending after December 27, 2020, that properly reflects the treatment of
each Farming Loss NOL under the CARES Act Amendments.
For example, a taxpayer who disregarded the CARES Act Amendments by using
a 2-year carryback for the farming loss portion of the taxpayer’s only Farming Loss NOL
and filed Forms 1120X for the two carryback years, and who subsequently timely files a
Form 1139 with a 5-year carryback that accounts for that Farming Loss NOL in a
manner consistent with the CARES Act Amendments for each of the five carryback
years, will not be treated as having made a Deemed Election. Similarly, a taxpayer who
filed a Form 1139 prior to December 27, 2020, and disregarded the CARES Act
Amendments by using a 2-year carryback for the farming loss portion of the taxpayer’s
only Farming Loss NOL and subsequently timely files a Form 1139 with a 5-year
carryback that accounts for that Farming Loss NOL in a manner consistent with the
CARES Act for each of the five carryback years, will not be treated as having made a
Deemed Election.
SECTION 4. REVOCATIONS REGARDING WAIVERS OF CARRYBACK PERIODS
.01 Revocation of election not to apply the two-year carryback period for farming
losses--(1) Overview. A taxpayer that, pursuant to § 172(b)(1)(B)(iv) or § 172(b)(3) of
the Code, elected not to have the two-year carryback period apply to the farming loss
portion of a Farming Loss NOL incurred in a taxable year beginning in 2018 or 2019
may revoke that election if the taxpayer--
(a) made that election before December 27, 2020; and
(b) satisfies all of the conditions described in section 4.01(2) of this revenue

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procedure.
(2) Time and manner for filing a revocation. To make a valid revocation under
section 4.01(1) of this revenue procedure, a taxpayer must satisfy the following
conditions:
(a) Revocation deadline. A taxpayer must make the revocation described in
section 4.01(1) of this revenue procedure by the date that is 3 years after the due date,
including extensions of time, for filing the return for the taxable year the Farming Loss
NOL was incurred.
(b) Required statement. The taxpayer must attach a statement to an amended
return for the loss year. The statement must provide in type or legible writing at the top
of the statement the following: “Pursuant to section 4.01 of Rev. Proc. 2021-14 the
taxpayer is revoking a prior §172(b)(1)(B)(iv) or § 172(b)(3) election not to have the two-
year carryback period provided by § 172(b)(1)(B)(i) apply to the Farming Loss NOL, as
defined in section 1.01 of Rev. Proc. 2021-14, incurred in the taxable year.”
SECTION 5. CONSOLIDATED GROUPS
.01 In general--(1) Defined terms. For purposes of this revenue procedure, with
regard to an affiliated group of corporations, as defined in section 1504 of the Code,
filing, or required to file, a consolidated return for the taxable year (consolidated group)--
(a) Taxpayer. The term “taxpayer” includes a consolidated group.
(b) NOL. The term “NOL” includes, with regard to a consolidated taxable year,
the excess of deductions over gross income, as determined under § 1.1502-11(a) of the
Income Tax Regulations without regard to any consolidated net operating loss (CNOL)

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deduction.
(2) Manner of making elections. An Affirmative Election under section 3.01 of this
revenue procedure and a revocation described in section 4.01 of this revenue
procedure are made by the agent for the consolidated group. An amended return
described in section 3.02(3) of this revenue procedure is filed, and a Deemed Election
under section 3.02 of this revenue procedure is deemed made, by the agent for the
consolidated group. See § 1.1502-77(a) and (c).
.02 Consequences of Affirmative and Deemed Elections. If the agent for the
consolidated group makes an Affirmative Election or a Deemed Election, the
consequences described in section 2.03(2) of this revenue procedure apply to the
consolidated group. Therefore, for example, if a consolidated group has a CNOL a
portion of which is a farming loss, and if the agent for the consolidated group makes an
Affirmative Election or a Deemed Election, then the portion of the CNOL that is a
farming loss can be carried back two taxable years, and the 80-percent limitation will
apply to determine the deduction for the entire CNOL for each taxable year beginning in
2018, 2019, or 2020.
.03 Reliance on rules in § 1.1502-21 regarding application of the 80-percent
limitation. If a consolidated group makes an Affirmative Election or a Deemed Election,
the consolidated group may choose to apply § 1.1502-21(a), (b)(1), (b)(2)(iv), and
(c)(1)(i)(E), as revised by TD 9927 (85 FR 67966, Oct. 27, 2020), for its taxable years
beginning in 2018, 2019, or 2020.
SECTION 6. EFFECTIVE DATE
This revenue procedure is effective on [INSERT DATE OF RELEASE].

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SECTION 7. DRAFTING INFORMATION
The principal author of this revenue procedure is Forest Boone of the Office of
Associate Chief Counsel (Income Tax & Accounting). For further information regarding
this revenue procedure, contact Lewis Saideman at (202) 317-5414, or (concerning
consolidated groups) Russell Jones at (202) 317-5357 (not a toll-free call).