Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. However, the portion of an 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% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD.
A qualified recovery assistance loss is the smaller of:
- The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or
- The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year):
- Qualified recovery assistance casualty loss (as defined below),
- Moving expenses paid or incurred after May 3, 2007, and before January 1, 2010, for the employment of an individual whose main home was in the Kansas disaster area before May 4, 2007, who was unable to remain in that home because of the storms and tornadoes, and whose main job location (after the move) is in the Kansas disaster area,
- Temporary housing expenses paid or incurred after May 3, 2007, and before January 1, 2010, to house employees of the taxpayer whose main job location is in the Kansas disaster area,
- Depreciation or amortization allowable for any qualified recovery assistance property (even if you elected not to claim the special recovery assistance depreciation allowance for such property) for the year placed in service, and
- Repair expenses (including expenses for the removal of debris) paid or incurred after May 3, 2007, and before January 1, 2010, for any damage from the storms and tornadoes to property located in the Kansas disaster area.
A qualified recovery assistance casualty loss is any deductible section 1231 loss of property located in the Kansas disaster area if the loss was caused by the storms and tornadoes. For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the storms and tornadoes of property located in the Kansas disaster area. Any such loss taken into account in figuring your qualified recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year.taxmap/pubs/p4492a-003.htm#en_us_publink10008569
If you have already filed your 2007 tax return and then carried your NOL back 2 years, you may file an amended return to carry back for 5 years your NOL attributable to a qualified recovery assistance loss.taxmap/pubs/p4492a-003.htm#en_us_publink10008570
For more information on NOLs, see Publication 536.