On July 10, 2023, the Treasury Department issued final regulations (T.D. 9977) regarding the application of the five-year extended net operating loss (NOLs) carryback period (retroactive statutory extension) enacted by the Coronavirus Aid, Relief and Economic Security Act (CARES Act).   Under the CARES Act, NOLs generated in taxable years beginning after December 31, 2017 and before January 1, 2021 may be carried back to the five taxable years preceding the tax year in which the NOLs relate, as opposed to the previously permitted 2-year carryback period. Substantively consistent with the temporary regulations published in 2020, the final regulations permit consolidated groups that acquired new members from another consolidated group (acquiring group) prior to the enactment of the retroactive statutory extension to make one of two elections to waive all or part of the pre-acquisition carryback period if certain statutory conditions are met. The two elections include an:

  • Amended Statute Split-Waiver Election: The acquiring group may make an irrevocable election to waive the carryback period related to the pre-acquisition consolidated NOLs of the acquired member that relate to the retroactive statutory extension and the 2-year carryback period. Thus, the acquiring group has the ability to eliminate any refund attributable to the acquired member that may have been available to the former consolidated group.
  • Extended Split-Waiver Election:  The extended split-waiver election is analogous to the amended statute split-waiver election except that it permits the acquiring group to irrevocably elect to waive only the carryback period attributable to the retroactive statutory extension.