Revenue Procedure 2021-14 provides guidance for treating net operating losses incurred in 2018, 2019 and 2020 related to farming.
By way of background, the Tax Cuts and Jobs Act repealed the ability of most taxpayers incurring a net operating loss (NOL) to carry that loss back. NOLs related to farming were permitted a carryback but only for two years. (And that carryback could be waived.)
The Coronavirus Aid, Relief and Economic Security (CARES) Act changed the treatment of all NOLs, including farm NOLs, for tax years 2018, 2019 and 2020. It provides a five-year carryback and repealed the prior restriction that limited the amount of the prior year income that could be offset by the NOL to 80% of the prior year’s taxable income. (The 80% limitation will be applicable again for taxable years beginning after Dec. 31, 2020.) This gives taxpayers with farm losses the ability to revoke a prior election to waive the carryback.
Now, the Covid-Related Tax Relief Act provides taxpayers with farming losses, as defined in IRC 172(b)1)(B)(ii), with an election to disregard the CARES Act provisions and continue to carry farm losses back two years subject to the 80% limitation.