Issue Date: July 15, 2000 This is the policy of the Department and is applicable to all open tax years. RE: Individual Net Operating Losses I.R.C. Section 172, Georgia Regulation 560-7-4-.01(1)(d) and by reference Georgia Regulation 560-7-3-.06(3)(e) and 560-7-3-.06(3)(f) provide guidance for the procedures for filing net operating losses for individuals. Georgia Regulation 560-7-3-.06(3)(e) indicates that a claim for refund must be filed on or before the fifteenth day of the fortieth month following the close of the taxable year wherein the loss was incurred. Question 1: Can a taxpayer waive the carryback period of a net operating loss? And if so, what are the procedures to do this? Answer 1: Georgia Regulation 560-7-4-.01(1)(d) indicates that the procedural sequence of taxable years to which a Georgia net operating loss may be carried back or carried over, and the number of years for which a net operating loss may be carried back or carried over, shall be the same as provided in Section 172 of the Internal Code. I.R.C. Section 172(b)(3) indicates that the waiver of the carryback period must be made by the due date (including extensions of time) for filing the taxpayers return for the taxable year of the net operating loss. Accordingly, if there is a net operating loss on the federal return and an election is made to waive the carryback period by the due date (including extensions of time) of the return, the taxpayer would be bound by that election for Georgia purposes and would have to waive the carryback period. If there is a Georgia net operating loss and no federal net operating loss, the taxpayer may make an election by the due date (including extensions of time) of the Georgia return to waive the carryback period. This would apply for Georgia purposes only. An affirmative statement must be attached to the return indicating that the election has been made. Example 1: The taxpayer files a federal return that has a net operating loss and an election is not made to waive the carryback period by the due date (including extensions of time) of the return. Assuming the taxpayer also has a Georgia net operating loss, an election to waive the carryback period could not be made on the Georgia return. This would apply no matter when the Georgia return is filed. Example 2: The taxpayer files a federal return that has a net operating loss and an election is made to waive the carryback period by the due date (including extensions of time) of the return. Assuming the taxpayer also has a Georgia net operating loss, the taxpayer would be bound by the federal election and would have to waive the carryback period for Georgia purposes. This would apply no matter when the Georgia return is filed. Example 3: The taxpayer files a federal return that does not have a net operating loss, hence no election to waive the carryback period is made. The taxpayer has a Georgia net operating loss and elects by the due date (including extensions of time) of the return to waive the carryback period for Georgia purposes only. The election would be valid. Example 4: The taxpayer files a federal return that does not have a net operating loss, hence no election to waive the carryback period is made. The taxpayer has a Georgia net operating loss and fails to elect by the due date (including extensions of time) of the return to waive the carryback period for Georgia purposes only. An election would not be available. This would apply if the taxpayer failed to make the election on a timely filed return (including extensions of time) or if the taxpayer did not file a return by the due date (including extensions of time) of the return and hence could not make the election. Question 2: The taxpayer fails to file a claim for refund for a net operating loss by the fifteenth day of the fortieth month following the close of the taxable year wherein the loss was incurred. Accordingly, the taxpayer would be statute barred from receiving a refund for those carryback years. However, if the loss is not fully absorbed in the carryback years, can the taxpayer file amended returns to determine the amount of the loss that is available to be carried forward to years that are not statute barred? Answer 2: Yes, amended returns could be filed for the statute barred years to determine the amount of the loss that is available to be carried forward to years that are not statute barred. Both the Internal Revenue Code, the Georgia Code, and the Georgia Regulations only deal with the statute barred years and do not say that the loss can not be carried forward after it has been carried back. Additionally, this position is consistent with the IRS treatment. Example 1: It is November of 1999. The taxpayer realizes that they have a Georgia net operating loss for 1994, which they did not carryback and did not elect to waive the carryback period when they filed the 1994 return. Accordingly, the loss would have to be carried back to 1991, 1992, and 1993 and then carried forward to 1995. Since a claim for refund should have been filed by 4-15-98, no refunds would be issued for 1991, 1992, and 1993. Additionally, since the statutory period has also expired for 1995, no refund would be issued for 1995. However, any excess loss that was not applied to 1991, 1992, 1993, and 1995 would be available to be carried forward to 1996. 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