Tucked into legislation aimed at extending unemployment insurance benefits is an amendment that could bring significant tax relief for businesses that have endured net operating losses (NOLs) in the recession. The proposal would let companies of all sizes carry back those losses for a refund of taxes paid in the five previous years, instead of the two years generally allowed under current law. The tax break looks a lot like one that was slated for the stimulus package earlier this year but was drastically scaled back at the last minute to apply only to businesses with revenue of $15 million a year or less (see my blog here.)

A bipartisan group of senators has basically agreed on the substance of the NOL carryback provisions, though the bill remains hung up on a bunch of other unrelated amendments that it has accumulated, Congressional Quarterly Inc. reports today.

Especially among Republicans in Congress, the NOL deal is seen as a way to get some desperately needed cash into the pockets of midsize and large businesses, which walked away disappointed and largely empty-handed from the stimulus bill. The retail industry, battered by constricted consumer spending and spooked by the prospect of another dismal holiday season, has been a vociferous supporter of the tax break. “For retailers struggling in the current recession, NOL carryback provides an important source of capital to finance ongoing operations and retain employees,” noted Steve Pfister, the National Retail Federation’s SVP for government relations, in a statement this week. “Because retail sales have fallen so dramatically over the past year and access to capital has been so limited, retailers are experiencing severe challenges in finding the cash they need to operate their businesses as the economy moves toward recovery.” ###