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New IRS compliance campaign on consolidated NOL carryovers (LB&I division)

IRS compliance campaign, consolidated NOL carryovers

The IRS Large Business & International (LB&I) division continues to expand its list of compliance campaigns by adding a new campaign addressing the limitations of consolidated net operating loss (NOL) carryovers—bringing the current total active campaigns listed on the LB&I website to 58 compliance campaigns.

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A description of this compliance campaign provided by the IRS is as follows:

According to the LB&I Limitations on consolidated net operating loss (CNOL) carryovers apply single entity treatment to the members of a consolidated group. Separate Return Limitation Year (SRLY) Rules, Consolidated Section 382 rules, and Loss Apportionment rules limit CNOLs that are carried over to reduce consolidated taxable income or produce a refund. Limitations on CNOL carryovers generally apply to cases where there has been an acquisition or disposition of a member of a consolidated group. 

This campaign addresses noncompliance with the two limitations on a group that acquires a member with an NOL carryover (SRLY and consolidated Section 382), as well as the one limitation on a group with a CNOL or CNOL carryover that disposes of a member to which a portion of the CNOL is attributable (Loss Apportionment). The goal of this campaign is to ensure taxpayer compliance with current law. The treatment stream for this campaign is issued-based examinations.

Background

IRS compliance campaigns represent the IRS’s shift from entity-based to issue-based examinations, with a focus on those issues that have been determined to present a significant risk of noncompliance. The IRS’s stated goal with its campaign initiative is to improve tax return and issue selection and thereby make the greatest use of limited IRS resources.  Each campaign is addressed using one or more “treatment streams” that include issue-based examinations, soft letters encouraging voluntary self-correction, and stakeholder outreach. 

Read the full list of LB&I compliance campaigns (as of September 29, 2020). 

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