The opinion
METRO ONE TELECOMMUNICATIONS, INC., PETITIONER
v. COMMISSIONER OF INTERNAL REVENUE,
RESPONDENT
Docket No. 12651–07. Filed December 15, 2010.
P claimed an alternative tax net operating loss (ATNOL)
deduction for 2002. P calculated the deduction by taking into
account a carryback of an ATNOL from 2004. The deduction
of the carryback reduced P’s alternative minimum taxable
income (AMTI) to zero. Held: P’s carryback of the ATNOL is
not a ‘‘carryover’’ under sec. 56(d)(1)(A)(ii)(I), I.R.C.; thus, sec.
56(d)(1)(A)(i)(II), I.R.C., precludes P from deducting an
ATNOL that offsets all of P’s AMTI.
Neil D. Kimmelfield, Lewis M. Horowitz, and John H.
Gadon, for petitioner.
John D. Davis, for respondent.
OPINION
PARIS, Judge: Petitioner petitioned the Court to redeter-
mine respondent’s determination of a $630,159 deficiency in
its 2002 Federal income tax. We decide whether section
56(d)(1)(A)(i)(II) precludes petitioner from deducting an alter-
native tax net operating loss (ATNOL) that offsets all of peti-
tioner’s alternative minimum taxable income (AMTI). 1 Our
1 Unless otherwise indicated, section references are to the applicable versions of the Internal
Revenue Code of 1986. Rule references are to the Tax Court Rules of Practice and Procedure.
573
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574 135 UNITED STATES TAX COURT REPORTS (573)
decision turns on whether petitioner’s carryback of an ATNOL
from 2004 is a ‘‘carryover’’ within the meaning of section
56(d)(1)(A)(ii)(I). We agree with respondent that the
carryback is not such a ‘‘carryover’’ and that petitioner’s
ATNOL deduction (ATNOLD) is limited by section
56(d)(1)(A)(i)(II).
Background
This case was submitted to the Court fully stipulated
under Rule 122. Our recitations of fact are based upon the
parties’ stipulations of fact and the exhibits submitted there-
with. We incorporate those stipulations herein by this ref-
erence. Petitioner is an Oregon corporation, and its principal
place of business was in Oregon when its petition was filed.
Petitioner’s AMTI for 2002 (2002 AMTI), as determined with-
out regard to the ATNOLD, is $37,540,893. For 2003 petitioner
incurred an ATNOL of $37,670,950 (2003 ATNOL). Petitioner
deducted $15,066,158 of the 2003 ATNOL as a carryback to
2001 and deducted the remaining $22,604,792 as a carryback
to 2002. Petitioner also deducted for 2002 $603,295 of ATNOLs
carried over from taxable years before 2001.
Petitioner’s 2002 AMTI was $14,332,806 after petitioner
deducted the $603,295 in carryovers and the $22,604,792
carryback ($37,540,893 – $603,295 – $22,604,792 =
$14,332,806). For 2004, petitioner incurred an ATNOL
of $29,427,241 (2004 ATNOL). Petitioner then claimed a
$14,332,806 deduction for 2002 on account of a carryback of
a like amount of the 2004 ATNOL, resulting in an ATNOLD for
2002 that offset all of petitioner’s AMTI for that year.
Respondent, in the notice of deficiency, determined for 2002
that the 90-percent limitation of section 56(d)(1)(A)(i)(II)
applied to petitioner’s ATNOLD and reduced the amount of the
carryback from 2004 to $11,182,013 (a reduction of
$3,150,793). The $3,150,793 reduction, in turn, created the
deficiency in petitioner’s tax (specifically, its alternative min-
imum tax (AMT)) for 2002. See sec. 55(b)(1)(B) (imposing a
tax rate of 20 percent, which when applied to the $3,150,793
increase in petitioner’s 2002 AMTI results in the $630,159
deficiency at issue).
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(573) METRO ONE TELECOMMS., INC. v. COMMISSIONER 575
Discussion
I. AMT
Section 55(a) imposes an AMT for a taxable year where the
tentative minimum tax exceeds the regular tax. See also
Allen v. Commissioner, 118 T.C. 1, 5 (2002). A corporate tax-
payer’s tentative minimum tax is ‘‘(i) 20 percent of so much
of the alternative minimum taxable income for the taxable
year as exceeds the exemption amount, reduced by (ii) the
alternative minimum tax foreign tax credit for the taxable
year.’’ Sec. 55(b)(1)(B). A corporate taxpayer’s AMTI equals its
taxable income as adjusted for certain items. See sec.
55(b)(2). One of those items, specified in section 56(a)(4),
allows a corporate taxpayer to claim an ATNOLD in lieu of a
net operating loss (NOL) deduction allowed under section 172.
II. Section 56(d)(1)
Section 56(d)(1) defines the term ‘‘alternative tax net oper-
ating loss deduction’’ for purposes of section 56(a)(4). As
enacted by the Tax Reform Act of 1986, Pub. L. 99–514, sec.
701(a), 100 Stat. 2320, section 56(d)(1) provided in relevant
part:
SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
DEFINED.—
(1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
native tax net operating loss deduction’’ means the net operating loss
deduction allowable for the taxable year under section 172, except that—
(A) the amount of such deduction shall not exceed 90 percent of
alternate minimum taxable income determined without regard to such
deduction * * *
This version of section 56(d)(1) was later amended three
times to arrive at the version applicable here.
First, the Omnibus Budget Reconciliation Act of 1990
(1990 Act), Pub. L. 101–508, sec. 11531(b)(1), 104 Stat. 1388–
490, amended section 56(d)(1)(A) to conform to the 1990 Act’s
enactment of section 56(h) (providing an adjustment relating
to ‘‘Energy Preferences’’). Following this amendment, which
was effective for taxable years beginning after December 31,
1990, see 1990 Act sec. 11531(c), 104 Stat. 1388–490, section
56(d)(1) provided in relevant part:
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576 135 UNITED STATES TAX COURT REPORTS (573)
SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
DEFINED.—
(1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
native tax net operating loss deduction’’ means the net operating loss
deduction allowable for the taxable year under section 172, except that—
(A) the amount of such deduction shall not exceed the excess (if any)
of—
(i) 90 percent of alternative minimum taxable income determined
without regard to such deduction and the deduction under sub-
section (h), over
(ii) the deduction under subsection (h), * * *
Second, the Job Creation and Worker Assistance Act of
2002 (2002 Act), Pub. L. 107–147, sec. 102(c)(1), 116 Stat. 26,
amended section 56(d)(1)(A) to let ‘‘carrybacks’’ of ATNOLs
from 2001 and 2002 offset AMTI of previous years without
regard to the 90-percent limitation. The 2002 Act also
amended section 56(d)(1)(A) to let ‘‘carryforwards’’ of ATNOLs
from years before 2001 offset AMTI for 2001 and 2002 without
regard to the 90-percent limitation. See id. The amendments
in the 2002 Act affected taxable years ending before January
1, 2003. See id. sec. 102(c)(2), 116 Stat. 26. Following those
amendments, section 56(d)(1) provided in pertinent part as
follows:
SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
DEFINED.—
(1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
native tax net operating loss deduction’’ means the net operating loss
deduction allowable for the taxable year under section 172, except that—
(A) the amount of such deduction shall not exceed the sum of—
(i) the lesser of—
(I) the amount of such deduction attributable to net operating
losses (other than the deduction attributable to carryovers
described in clause (ii)(I)), or
(II) 90 percent of alternative minimum taxable income deter-
mined without regard to such deduction, plus
(ii) the lesser of—
(I) the amount of such deduction attributable to the sum of
carrybacks of net operating losses for taxable years ending during
2001 or 2002 and carryforwards of net operating losses to taxable
years ending during 2001 and 2002 * * * [Emphasis added.]
Third, in ‘‘Title IV—Tax Technical Corrections’’, the
Working Families Tax Relief Act of 2004 (2004 Act), Pub. L.
108–311, sec. 403(b)(4), 118 Stat. 1187, specified ‘‘clerical
changes’’ to the NOL and ATNOL provisions set forth in 2002
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(573) METRO ONE TELECOMMS., INC. v. COMMISSIONER 577
Act section 102. H. Conf. Rept. 108–696, at 90 (2004). The
2004 Act replaced the word ‘‘carryforwards’’ in section
56(d)(1)(A)(ii)(I) with the word ‘‘carryovers’’, amended sec-
tion 56(d)(1)(A)(ii)(I) by substituting ‘‘from taxable years’’ in
place of ‘‘for taxable years’’, and amended section
56(d)(1)(A)(i)(I) to strike ‘‘attributable to carryovers’’. See
2004 Act sec. 403(b)(4). The 2004 Act also amended the effec-
tive date provision set forth in 2002 Act sec. 102(c)(2), by
substituting ‘‘after December 31, 1990’’ for ‘‘before January 1,
2003’’. Id. sec. 403(b)(3). The amendments in the 2004 Act
were effective as if they had been included in the 2002 Act.
See id. sec. 403(f), 118 Stat. 1188. Following these amend-
ments, section 56(d)(1) provides in pertinent part as follows:
SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
DEFINED.—
(1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
native tax net operating loss deduction’’ means the net operating loss
deduction allowable for the taxable year under section 172, except that—
(A) the amount of such deduction shall not exceed the sum of—
(i) the lesser of—
(I) the amount of such deduction attributable to net operating
losses (other than the deduction described in clause (ii)(I)), or
(II) 90 percent of alternative minimum taxable income deter-
mined without regard to such deduction, plus
(ii) the lesser of—
(I) the amount of such deduction attributable to the sum of
carrybacks of net operating losses from taxable years ending
during 2001 or 2002 and carryovers of net operating losses to tax-
able years ending during 2001 and 2002 * * * [Emphasis added. 2]
III. Computation of ATNOLD
We interpret a statute by looking first to its text. See Wil-
liams v. Taylor, 529 U.S. 420, 431 (2000); United States v.
Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). The plain
meaning of the text is generally conclusive if the text is clear
and fits the case. See Sullivan v. Stroop, 496 U.S. 478, 482
(1990) (‘‘ ‘If the statute is clear and unambiguous ‘‘that is the
end of the matter * * * [as a court] must give effect to the
unambiguously expressed intent of Congress.’’ ’ ’’ (quoting K
2 This version of sec. 56(d)(1) was in effect when the petition was filed. Sec. 56(d)(1)(A)(ii)(I)
was later amended by the Worker, Homeownership, and Business Assistance Act of 2009, Pub.
L. 111–92, sec. 13(b), 123 Stat. 2993. That amendment is not applicable here because it applies
(with an exception not relevant here) to taxable years ending after Dec. 31, 2002. See id. sec.
13(e)(2), 123 Stat. 2995.
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578 135 UNITED STATES TAX COURT REPORTS (573)
Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291–292 (1988))).
‘‘[C]ourts must presume that a legislature says in a statute
what it means and means in a statute what it says there.’’
Conn. Natl. Bank v. Germain, 503 U.S. 249, 253–254 (1992).
Under the applicable version of section 56(d)(1), as under
its predecessors, the starting point in computing an ATNOLD
is ‘‘the net operating loss deduction allowable for the taxable
year under section 172’’, as adjusted for (as relevant here)
the limitation in section 56(d)(1)(A). For purposes of the reg-
ular income tax, section 172(a) allows a deduction equal to
the sum of the NOL carryovers and carrybacks to the taxable
year. Section 172(b)(1)(A) provides generally that an NOL for
a taxable year shall be a ‘‘carryback’’ to each of the 2 taxable
years preceding the loss year and a ‘‘carryover’’ to each of the
20 taxable years following the loss year. Section 172(a) and
(b)(1), by its terms, clearly distinguishes a ‘‘carryback’’ from
a ‘‘carryover’’, indicating that the former goes back in time
and the latter goes forward.
Petitioner argues that, contrary to the text of section
172(a) and (b)(1), its 2004 ATNOL is a ‘‘carryover’’ to 2002 for
purposes of section 56(d)(1)(A)(ii)(I). We disagree. Section
56(d)(1) defines an ATNOLD by cross-reference to an NOL
deduction under section 172, and section 56(d)(1) does not set
forth any period for a ‘‘carryover’’ or a ‘‘carryback’’ of an
ATNOL in determining an ATNOLD. See also Plumb v. Commis-
sioner, 97 T.C. 632, 638 (1991) (explaining that there is not
a separate period of carryover or of carryback for purposes of
the AMT). Because an ATNOLD cannot be determined without
reference to and reliance upon the NOL deduction of section
172, our interpretation of ‘‘carryover’’ for purposes of sec-
tion 56(d)(1)(A)(ii)(I) is guided by the meaning it acquires as
a result of the interplay of sections 56(d) and 172, and the
definition of ‘‘carryover’’ in section 172 must control the
carryover of an ATNOL for purposes of determining an
ATNOLD under section 56(d)(1). We conclude that section
56(a)(1) does not allow for a ‘‘carryover’’ of an ATNOL to a
prior period because section 172 does not allow for a ‘‘carry-
over’’ of an NOL to a prior period.
Petitioner seeks a different conclusion by isolating the
term ‘‘carryover’’ as it appears in section 56(d)(1)(A)(ii)(I)
from the meaning attached to the term by section 172(a) and
(b)(1) or, in other words, by taking the term out of context.
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(573) METRO ONE TELECOMMS., INC. v. COMMISSIONER 579
Petitioner’s approach is mistaken. Interpreting the term
‘‘carryover’’ in the context of the AMT to permit a carryback
of a loss, as does petitioner, would create illogic in the
application of section 56(d). The period of carryover or of
carryback for purposes of the AMT must be derived from sec-
tion 172(b)(1)(A), which permits a ‘‘carryover’’ of a loss
incurred in 2004 to each of the 20 ‘‘following’’ years. Section
172 has no provision, thus neither does section 56(d)(1), that
would allow for a ‘‘carryover’’ of a loss from 2004 to 2002. A
loss incurred in 2004 may be applied to 2002, for purposes
of the AMT, as for purposes of the regular income tax, only
by means of a ‘‘carryback’’, see sec. 172(b)(1)(A)(i), and such
a carryback, because not from a taxable year ending in 2001
or 2002, is subject to the 90-percent limitation of section
56(d)(1)(A)(i)(II).
Petitioner also argues that the wording change from
‘‘carryforward’’ to ‘‘carryover’’ in the 2004 Act indicates that
Congress specifically intended that an ATNOL carried to 2002
from a subsequent year be exempt from the 90-percent
limitation. We disagree. The House and Senate conferees
described the changes made to section 56(d)(1)(A) by the
2004 Act as ‘‘clerical’’. H. Conf. Rept. 108–696, supra at 90.
The Staff of the Joint Committee on Taxation did likewise.
See Staff of Joint Comm. on Taxation, Description of the
‘‘Tax Technical Corrections Act of 2003’’ (JCX–104–03), at 4
(J. Comm. Print 2003). Moreover, the 2004 Act amendments
have a significance opposite to that which petitioner assigns
to them. The 2004 Act modified section 56(d)(1)(A) to bring
clause (i)(I) into closer alignment with section 172(b)(1)(A).
The modifications confirmed that ‘‘carryover’’ in section
56(d)(1)(A)(ii)(I) is to be construed in pari materia with
‘‘carryover’’ in section 172(b)(1)(A)(ii). The change from
‘‘carryforward’’ to ‘‘carryover’’ preserves uniformity of lan-
guage between sections 56 and 172 (as section 172 uses the
term ‘‘carryover’’) and is not a substantive change such as
would have the effect petitioner attributes to it.
Petitioner also argues that Congress changed the effective
date of section 56(d)(1)(A) from ‘‘taxable years ending before
January 1, 2003’’ to ‘‘taxable years ending after December 31,
1990’’ to enable taxpayers to carry back losses to 2001 and
2002 under the 2004 Act. We disagree. As we understand
petitioner’s argument, it brings to the fore that the effective
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580 135 UNITED STATES TAX COURT REPORTS (573)
date of the amendments made to section 56(d)(1)(A) by the
2002 Act differs from the effective date of the amendments
made to that provision by the 2004 Act. Petitioner construes
this alteration as support for its position that an ATNOL
incurred in 2004 may be offset against AMTI for 2002 without
applying the 90-percent limitation. Petitioner’s reasoning is
tenuous. Although Congress did not specifically explain its
reason for the change of effective dates, the effective date of
the 2002 amendments (for taxable years ending before
January 1, 2003) was not itself an impediment to the offset
petitioner seeks. Thus, it cannot be said that the change in
effective date came about as a means to facilitate its position.
We note as a final point that the House Committee on
Ways and Means proposed a bill that would have allowed an
NOL deduction attributable to NOL carrybacks arising in tax-
able years ending in 2003, 2004, and 2005, as well as NOL
carryforwards to these taxable years, to offset 100 percent of
the taxpayer’s AMTI. See Staff of Joint Comm. on Taxation,
Description of the Chairman’s Amendment in the Nature of
a Substitute to H.R. 2, the ‘‘Jobs And Growth Tax Act Of
2003’’ (JCX–40–03), at 19–20 (J. Comm. Print 2003). This pro-
posal is consistent with petitioner’s position. Congress, how-
ever, chose not to enact this option. That Congress appar-
ently considered whether to allow such carrybacks and
choose not to do so undercuts petitioner’s claim.
IV. Conclusion
We hold that petitioner’s carryback of the ATNOL from 2004
to 2002 is not a ‘‘carryover’’ within the meaning of section
56(d)(1)(A)(ii)(I) and that section 56(d)(1)(A)(i)(II) precludes
petitioner from deducting an ATNOL that offsets all of its
AMTI for 2002. We have considered all arguments for a con-
trary holding and, to the extent not discussed above, find
those arguments to be without merit. In the light of the par-
ties’ submitting this case to the Court fully stipulated under
Rule 122 our holding results in the entry of decision for
respondent. Accordingly,
Decision will be entered for respondent.
f
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