Carryback of Net Operating Loss by Certain Exempt Organizations
On March 27, 2020, Congress amended the net operating loss (“NOL”) provisions in section 172 as part of the CARES Act to provide that any NOL arising in a taxable year beginning after December 31, 2017, and before January 1, 2021, (“CARES Act NOLs”) may be carried back to the five taxable years preceding the taxable year of such loss.
There was significant uncertainty as to how exempt organizations would be able to utilize this new provision since section 512(a)(6), added by the Tax Cuts and Jobs Act, requires exempt organizations with more than one unrelated trade or business activity to calculate their NOLs by separate trade or business activity effective for taxable years beginning after December 31, 2017.
Fortunately, earlier this week, the IRS issued FAQs with respect to the carryback of CARES Act NOLs by exempt organizations. The guidance provides that CARES Act NOLs can be carried back and deducted against aggregate UBTI in the applicable years mentioned previously.