[Congressional Record Volume 155, Number 12 (Wednesday, January 21, 2009)]
[Senate]
[Pages S722-S723]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. SPECTER:
  S. 293. A bill to provide for a 5-year carryback of certain net 
operating losses and to suspend the 90 percent alternative minimum tax 
limit on certain net operating losses; to the Committee on Finance.
  Mr. SPECTER. Mr. President, I have sought recognition to introduce 
legislation to expand a widely-used business tax benefit whereby 
business owners balance-out net losses over prior years when the firm 
has a net operating gain. Spreading out this tax liability helps a 
business to decrease the adverse impact of a difficult year. At the 
current time, there is a critical need for pro-growth policy 
initiatives to ensure an economic recovery.
  Specifically, this legislation increases the general net operating 
loss, NOL, carryback period from 2 years to 5 years in the case of an 
NOL for any taxable year ending during 2007, 2008, or 2009. As an 
example, a company could offset NOLs in 2008 against positive income it 
earned in 2003-2007; resulting in a refund paid in 2009. NOLs represent 
the losses reported by a company within a taxable year and, under 
current law, generally may be carried back 2 years and forward 20 years 
for tax purposes.
  Under current law, NOLs are not allowed to reduce Alternative Minimum 
Tax, AMT, liability by more than 90 percent. My legislation would 
eliminate this limit. This second provision is necessary for this bill 
to achieve its goal of allowing firms dollar-for-dollar access to their 
NOLs. This is because firms with temporarily low income are more likely 
both to create NOLs and to find themselves subject to the AMT.
  From an economic standpoint, the key impact of the bill will be to 
lower the user cost of capital for firms and to encourage business 
fixed investment for those firms that were profitable in the past 5 
years but are not profitable at the current time. Such firms will 
receive an immediate refund for their current costs.

  The U.S. Chamber of Commerce, National Association of Manufacturers, 
and National Federation of Independent Business, NFIB, have all been 
supportive of this proposal in previous years.

[[Page S723]]

  Similar legislation was considered in the 110th Congress, but was not 
enacted. During consideration of the Recovery Rebates and Economic 
Stimulus for the American People Act of 2008, an amendment drafted by 
the Senate Finance Committee leadership included this important 
provision, as well as other items. On February 6, 2008, the Senate 
rejected this broader package on a procedural vote, leaving it just 1 
vote short of the 60 that were required. Ultimately, that bill included 
tax rebates for individuals and capital investment incentives for 
businesses. Following that debate, I introduced the NOL carryback 
provision as a stand-alone bill, S. 2650, with 7 cosponsors.
  Over the long-term, this is a low cost proposal for the taxpayer that 
can stimulate economic growth. According to a February 2004 report 
entitled ``Stimulating Job Creation and Investment: Economic Impact of 
NOL Carryback Legislation,'' by Kevin A. Hassett, Ph.D, and Brian C. 
Becker, Ph.D, ``If enacted, this expansion of the carryback period 
would result in current-year refunds for many companies that otherwise 
would have to wait until future years to apply NOLs. Having done so, 
however, would reduce the quantity of losses that are carried forward, 
and hence increase, relative to baseline, tax revenue in the future. As 
such, the tax revenue implications are negative initially, but positive 
in the future.'' The Joint Committee on Taxation estimated that passage 
of a similar provision as part of the Senate Finance Committee Stimulus 
package, which I referenced earlier in my statement, would have cost 
$15 billion in 2008 and $5.1 billion over 10 years.
  I urge my colleagues to support this important legislation that will 
help numerous industries that are currently struggling to survive in a 
harsh economic downturn.
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