Final regulations: consolidated net operating losses

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October 2020

Overview

Treasury and the IRS released on October 13 Final Regulations under Section 1502 implementing recent statutory amendments to Section 172 relating to the absorption of consolidated net operating loss (CNOL) carryovers and carrybacks. Treasury and the IRS on July 8, 2020 published proposed and temporary Section 1502 regulations (the 2020 Proposed Regulations and 2020 Temporary Regulations) implementing the amendments to Section 172.

Our prior PwC Insight outlined highlights of the 2020 Proposed Regulations and 2020 Temporary Regulations. Because the Final Regulations adopt the provisions of the 2020 Proposed Regulations, with certain modifications discussed below, but do not adopt or modify the text contained in the 2020 Temporary Regulations, this Insight describes the most significant changes from the 2020 Proposed Regulations.

The takeaway

The Final Regulations largely adopt as final the 2020 Proposed Regulations, which provide helpful guidance regarding implementation of the 80-percent limitation and other 2017 Act and CARES Act amendments to Section 172 within a consolidated group. The certainty provided by the Final Regulations will help consolidated taxpayers strategically plan for 2021. 

See also

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Doug McHoney

International Tax Services Leader, PwC US

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