CAPITAL LOSSES OF CORPORATIONS.

SEC. 512. CAPITAL LOSSES OF CORPORATIONS. (a) Three-Year Carryback of Net Capital Losses.—Section 1212(a)(1) (relating to capital loss carryover for corporations) is amended to read as follows: “(1) In general.—If a corporation has a net capital loss for any taxable year (hereinafter in this paragraph referred to as the ‘loss year’), the amount thereof shall be— “(A) a capital loss carryback to each of the 3 taxable years preceding the loss year, but only to the extent— “(i) such loss is not attributable to a foreign expropriation capital loss, and “(ii) the carryback of such loss does not increase or produce a net operating loss (as defined in section 172(c)) for the taxable year to which it is being carried back; and “(B) a capital loss carryover to each of the 5 taxable years (10 taxable years to the extent such loss is attributable to a foreign expropriation capital loss) succeeding the loss year, and shall be treated as a short-term capital loss in each such taxable year. The entire amount of the net capital loss for any taxable year shall be carried to the earliest of the taxable years to which such loss may be carried, and the portion of such loss which shall be carried to each of the other taxable years to which such loss may be carried shall be the excess, if any, of such loss over the total of the net capital gains for each of the prior taxable years to which such loss may be carried. For purposes of the preceding sentence, the net capital gain for any such prior taxable year shall be computed without regard to the net capital loss for the loss year or for any taxable year thereafter. In the case of any net capital loss which cannot be carried back in full to a preceding taxable year by reason of clause (ii) of subparagraph (A), the net capital gain for such prior taxable year shall in no case be treated 83 Stat. 639 as greater than the amount of such loss which can be carried back to such preceding taxable year upon the application of such clause (ii).” (b) Special rules.—Section 1212(a) (relating to net capital losses of corporations) is amended by adding at the end thereof the following new paragraphs: “(3) Electing small business corporations.—Paragraph (1)(A) shall not apply to the net capital loss of a corporation for any taxable year for which it is an electing small business corporation under subchapter S, and a net capital loss of a corporation (for a year for which it is not such an electing small business corporation) shall not be carried back under paragraph (1)(A) to a taxable year for which it is an electing small business corporation. “(4) Special rules on carrybacks.—A net capital loss of a corporation shall not be carried back under paragraph (1)(A) to a taxable year— “(A) for which it is a foreign personal holding company (as defined in section 552); “(B) for which it is a regulated investment company (as defined in section 851); “(C) for which it is a real estate investment trust (as defined in section 856); or “(D) for which an election made by it under section 1247 is applicable (relating to election by foreign investment companies to distribute income currently).” (c) Certain Corporate Acquisitions.—Section 381(b)(3) (relating to operating rules for carryovers in certain corporate acquisitions) is amended by striking out “a net operating loss” and inserting in lieu thereof “a net operating loss or a net capital loss”. (d) Tentative Carryback Adjustments.—Section 6411 (relating to quick refunds in respect of tentative carryback adjustments) is amended— (1) by striking out the first two sentences of subsection (a) and inserting in lieu thereof “A taxpayer may file an application for a tentative carryback adjustment of the tax for the prior taxable year affected by a net operating loss carryback provided in section 172(b), by an investment credit carryback provided in section 46(b), or by a capital loss carryback provided in section 1212(a)(1), from any taxable year. The application shall be verified in the manner prescribed by section 6065 in the case of a return of such taxpayer, and shall be filed, on or after the date of filing of the return for the taxable year of the net operating loss, net capital loss, or unused investment credit from which the carryback results and within a period of 12 months from the end of such taxable year (or, with respect to any portion of an investment credit carryback from a taxable year attributable to a net operating loss carryback or a capital loss carryback from a subsequent taxable year, within a period of 12 months from the end of such subsequent taxable year), in the manner and form required by regulations prescribed by the Secretary or his delegate.”, and (2) by striking out “net operating loss or unused investment credit”, wherever such term appears in subsections (a)(1), (b), and, (c), and inserting in lieu thereof “net operating loss, net capital loss, or unused investment credit”. (e) Statutes of Limitations and Interest Relating to Capital Loss Carrybacks.— 83 Stat. 640 (1) Assessment and collection.—Section 6501 (relating to limitations on assessment and collection) is amended— (A) by striking out “Loss Carrybacks” in the heading of subsection (h) and inserting in lieu thereof “Loss or Capital Loss Carrybacks”, (B) by striking out “loss carryback” in subsection (h) and inserting in lieu thereof “loss carryback or a capital loss carryback”, (C) by striking out “operating loss which” in subsection (h) and inserting in lieu thereof “operating loss or net capital loss which”, (D) by striking out “assessed, or within 18 months” and all that follows thereafter in subsection (h) and inserting in lieu thereof “assessed. In the case of a deficiency attributable to the application of a net operating loss carryback, such deficiency may be assessed within 18 months after the date on which the taxpayer files in accordance with section 172(b)(3) a copy of the certification (with respect to the taxable year of the net operating loss) issued under section 317 of the Trade Expansion Act of 1962, if later than the date prescribed by the preceding sentence.”, (E) by striking out “loss carryback” in subsection (j) and inserting in lieu thereof “loss carryback or a capital loss carryback”, and (F) by striking out “net operating loss carryback or an investment credit carryback” in subsection (m) and inserting in lieu thereof “net operating loss carryback, a capital loss carryback, or an investment credit carryback”. (2) Credit or refund.—Subsection (d) of section 6511 (relating to limitations on credit or refund) is amended— (A) by striking out “loss carrybacks” in the heading of paragraph (2) and inserting in lieu thereof “loss or capital loss carrybacks”, (B) by striking out “loss carryback” in that part of paragraph (2)(A) which precedes clause (i) thereof and inserting in lieu thereof “loss carryback or a capital loss carryback”, (C) by striking out “operating loss which” in that part of paragraph (2)(A) which precedes clause (i) thereof and inserting in lieu thereof “operating loss or net capital loss which”, (D) by striking out “loss carryback” in the first sentence of paragraph (2)(B)(i) and inserting in lieu thereof “loss carryback or a capital loss carryback”. (E) by amending the last sentence of paragraph (2)(B)(i) to read as follows: “In the case of any such claim for credit or refund or any such application for a tentative carryback adjustment, the determination by any court, including the Tax Court, in any proceeding in which the decision of the court has become final, shall be conclusive except with respect to the net operating loss deduction, and the effect of such deduction, or with respect to the determination of a short-term capital loss, and the effect of such short-term capital loss, to the extent that such deduction or short-term capital loss is affected by a carryback which was not an issue in such proceeding.”, (F) by striking out “loss carryback” in paragraph (2)(B)(ii) and inserting in lieu thereof “loss carryback or a capital loss carryback, as the case may be,”, and 83 Stat. 641 (G) by striking out “loss carryback” in paragraph (4)(A) and inserting in lieu thereof “loss carryback or a capital loss carryback”. (3) Interest on underpayments.—Section 6601(e) (relating to computation of interest in case of carryback or adjustment for certain unused deductions) is amended— (A) by striking out “loss carryback” in the heading of paragraph (1) and inserting in lieu thereof “loss or capital loss carryback”, (B) by striking out “net operating loss” wherever it appears in paragraph (1) and inserting in lieu thereof “net operating loss or net capital loss”, and (C) by striking out “loss carryback” in paragraph (2) and inserting in lieu thereof “loss carryback or a capital loss carryback”. (4) Interest on overpayments.—Section 6611(f) (relating to interest in case of refund of income tax caused by carryback or adjustment for certain unused deductions) is amended— (A) by striking out “loss carryback” in the heading of paragraph (1) and inserting in lieu thereof “loss or capital loss carryback”, (B) by striking out “net operating loss” wherever it appears in paragraph (1) and inserting in lieu thereof “net operating loss or net capital loss”, and (C) by striking out “loss carryback” in paragraph (2) and inserting in lieu thereof “loss carryback or a capital loss carryback”. (f) Technical Amendments.— (1) The heading of section 1212 is amended by striking out “CARRYOVER” and inserting in lieu thereof “CARRYBACKS AND CARRYOVERS”. (2) The item relating to section 1212 in the table of sections for part II of subchapter P of chapter 1 is amended by striking out “carryover” and inserting in lieu thereof “carrybacks and carryovers”. (3) Section 246(b)(1) (relating to dividends received deduction) is amended by striking out “and 247” and inserting in lieu thereof “and 247, and without regard to any capital loss carryback to the taxable year under section 1212(a)(1).” (4) Section 481(b)(3)(A) (relating to changes in method of accounting) is amended by striking out “loss carryover” and inserting in lieu thereof “loss carryback or carryover”. (5) Section 535(b)(6) (relating to improper accumulations of surplus) is amended— (A) by striking out “capital loss carryover” in the first sentence and inserting in lieu thereof “capital loss carryback or carryover”, and (B) by striking out “capital loss carryover” in subparagraph (B) and inserting in lieu thereof “capital loss carryback and carryover”. (6) Paragraph (7) of section 535(b) (relating to treatment of capital loss carryovers) is amended to read as follows: “(7) Capital Loss.—No allowance shall be made for the capital loss carryback or carryover provided in section 1212.” (7) Section 1314(a) (relating to mitigation of limitations) is amended by striking out “capital loss carryover” and inserting in lieu thereof “capital loss carryback or carryover”. 83 Stat. 642 (8) The last sentence of section 1314(b) (relating to method of adjustment) is amended to read as follows: “In the case of an adjustment resulting from an increase or decrease in a net operating loss or net capital loss which is carried back to the year of adjustment, interest shall not be collected or paid for any period prior to the close of the taxable year in which the net operating loss or net capital loss arises.” (g) Effective Date.—The amendments made by this section shall apply with respect to net capital losses sustained in taxable years beginning after December 31, 1969.