Virginia: Taxpayer Evidenced Intent to Waive NOL Carryback

The Virginia Tax Commissioner recently ruled that a corporation properly elected to waive the two-year NOL carryback. The taxpayer reported a net operating loss (NOL) and decided to forego the two-year carryback period, utilizing the NOL in the three subsequent years. For the tax year at issue, a federal regulation required consolidated federal filers to elect to waive the carryback period by attaching a statement to its return. Corporations filing a separate federal return were not required to attach this statement. Such corporations were merely required to check the box on the Federal Schedule K indicating that it would forego the carryback period. 

While it filed as part of a federal consolidated group, the taxpayer attached a separate pro forma federal return to its 2012 Virginia corporate income tax return and checked the box on federal Schedule K indicating that it was forgoing the two-year carryback. No statement was attached to the Virginia return. The Department of Taxation took the position that the taxpayer did not properly waive the carryback, and the taxpayer appealed. The Commissioner determined that because the taxpayer checked the box on its pro forma Schedule K, this was sufficient to indicate to the Department that the taxpayer intended to forego the carryback. The case was remanded to the auditor to adjust the assessments based on the waiver of the carryback period. Please contact Diana Smith with questions on P.D. 21-27.