ALLOWANCE OF NET OPERATING LOSS CARRYOVER.

SEC. 1606. ALLOWANCE OF NET OPERATING LOSS CARRYOVER. (a) Allowance of Deduction.— Section 857(b)(2) (relating to real estate investment trust taxable income) is amended by striking out subparagraph (E) and by redesignating subparagraph (F) as subparagraph (D). (b) Years to Which Loss May Be Carried.— Section 172(b)(1) (relating to years to which a net operating loss may be carried) is amended by inserting after subparagraph (D) thereof the following: “(E) in the case of a taxpayer which has a net operating loss for any taxable year for which the provisions of part II of subchapter M (relating to real estate investment trusts) apply to such taxpayer, such loss shall not be a net operating loss carryback to any taxable year preceding the taxable year of such loss and shall be a net operating loss carryover to each of the 8 taxable years following the taxable year of such loss, except, in the case of a net operating loss for a taxable year ending before January 1, 1976, such loss shall not be carried to the 6th, 7th. or 8th taxable year following the taxable year of such loss unless part. II of subchapter M applied to the taxpayer for the taxable year to which the loss is carried and for all intervening taxable years following the year of loss. 90 STAT. 1756A net operating loss shall not be carried back to a taxable year for which part II of subchapter M applied to the taxpayer,” (c) Determination of the Amount of the Net Operating Loss and the Carryover.— Section 172(d) (relating to modifications in computing net operating loss) is amended by adding a new paragraph (7) at the end thereof, to read as follows: “(7) in the case of any taxable year for which part II of subchapter if (relating to real estate investment trusts) applies to the taxpayer— “(A) the net operating loss for such taxable year shall be computed by taking into account the adjustments described in section 857(b)(2)(other than the deduction for dividends paid described in section 857(b)(2)(B)); and “(B) where such taxable year is a ‘prior taxable year’ referred to in paragraph (2) of subsection (b), the term ‘taxable income’ in such paragraph shall mean ‘real estate investment trust taxable income’ (as defined in section 857, (b)(2)).” (d) Conforming Amendment.— Subparagraph (B) of section 857 (b)(2) (relating to real estate investment trust taxable income), as redesignated by section 1607(b) of this Act, is amended by striking out “subparagraph (F)” and inserting in lieu thereof “subparagraph (D)”.