United States Tax Court

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REVIEWED

165 T.C. No. 11

APACHE CORPORATION AND SUBSIDIARIES,

Petitioner

COMMISSIONER OF INTERNAL REVENUE,

Respondent

—————

Docket No. 25984-22.

Filed November 13, 2025.

—————

For each of 2016 and 2017, P reported a net

operating loss that consisted in part of a “specified liability

loss” within the meaning of I.R.C. § 172(f)(1). P’s return for

each year included an election under Treas. Reg. § 1.150221(b)(3)(i) to waive the entire carryback period pursuant to

section 172(b)(3) for the consolidated net operating loss of

the consolidated group of which P was the common parent.

P expressly stated that P did not elect under I.R.C.

§ 172(f)(6) to relinquish the carryback period with respect

to the specified liability loss incurred in each year.

P received a tentative refund for each of 2006 and

2007 from the carryback of the specified liability losses it

reported for 2016 and 2017, respectively. R then

determined deficiencies for 2006 and 2007 based on the

disallowance of the carrybacks.

P has moved for partial summary judgment that its

election for each year relinquished the carryback of only

that portion of its net operating loss that exceeded its

reported specified liability loss. R seeks partial summary

judgment that P’s election for each of 2016 and 2017

relinquished the carryback of its entire net operating loss

for the year.

Served 11/13/25

Held: P’s election for each year relinquished the

carryback of only that portion of its net operating loss that

exceeded its reported specified liability loss.

Held, further, P’s Motion will be granted; R’s Motion

will be denied.

TORO, J., wrote the opinion of the Court, which

URDA, C.J., and KERRIGAN, NEGA, PUGH, ASHFORD,

COPELAND, JONES, GREAVES, WEILER, WAY,

LANDY, ARBEIT, GUIDER, JENKINS, and FUNG, JJ.,

joined and which BUCH, J., joined as to Part IV.

BUCH, J., wrote a concurring opinion.

HALPERN, J., wrote an opinion concurring in part

and dissenting in part, which MARSHALL, J., joined.

—————

Shawn R. O’Brien and Edward L. Froelich, for petitioner.

Estevan D. Fernandez, Monica D. Polo, Jennifer C. Arthur, Christopher

M. Menczer, Casinova O. Henderson, and Michael A. Sienkiewicz, for

respondent.

OPINION

TORO, Judge: “A ‘net operating loss’ results from deductions in

excess of gross income for a given year.” See United Dominion Indus.,

Inc. v. United States, 532 U.S. 822, 825 (2001) (citing I.R.C. § 172(c)). 1

Section 172 permits taxpayers to carry net operating losses through

time, taking them backward or forward to years for which they can be

deducted. 2 See United Dominion, 532 U.S. at 825. The provision serves

1 Unless otherwise indicated, statutory references are to the Internal Revenue

Code, Title 26 U.S.C. (I.R.C. or Code), in effect at all relevant times, regulation

references are to the Code of Federal Regulations, Title 26 (Treas. Reg.), in effect at all

relevant times, and Rule references are to the Tax Court Rules of Practice and

Procedure.

2 We use the present tense to refer to the law that existed for the years at issue

in this case, 2016 and 2017. In 2017, Congress amended section 172 with the result

to smooth a taxpayer’s profits and losses, allowing it “to set off its lean

years against its lush years.” Libson Shops, Inc. v. Koehler, 353 U.S.

382, 386 (1957); accord United Dominion, 532 U.S. at 825.

By default, a net operating loss can be carried back 2 years and

then forward 20 years. I.R.C. § 172(b)(1)(A). Over time, Congress has

defined categories of losses which can be carried back further,

recognizing that certain types of losses “tend to be particularly ‘large

and sporadic.’” United Dominion, 532 U.S. at 825 (quoting Staff of J.

Comm. on Tax’n, 95th Cong., General Explanation of the Revenue Act

of 1978, JCS-7-79, at 232 (J. Comm. Print)). As relevant here, in 1990,

Congress changed the law so that a “specified liability loss” could be

carried back ten years. 3

But Congress did not leave taxpayers without choices.

Section 172 permits taxpayers to elect not to carry back their net

operating losses and instead to carry such losses only forward. The

election is helpful to taxpayers who have tax attributes (such as credits)

that might otherwise expire unused. A taxpayer in that position might

prefer to use expiring credits during the earlier years to which a net

operating loss would otherwise have been carried back and have the loss

available for use in the future.

Petitioner, Apache Corp. & Subs. (Apache), is one such taxpayer.

For 2016 and 2017, it made elections under section 172(b)(3) to waive

the carryback period for its normal net operating losses. That is, it chose

to carry those losses only forward. But it expressed an intent not to

relinquish the ten-year carryback for its specified liability losses.

Now before the Court are Cross-Motions for Partial Summary

Judgment concerning whether Apache was able to restrict its elections

that, under current law, most net operating losses cannot be carried back at all. I.R.C.

§ 172(b)(1) (as amended by the Tax Cuts and Jobs Act, Pub. L. No. 115-97, § 13302(b),

131 Stat. 2054, 2122 (2017)).

3 As the Supreme Court observed in United Dominion, 532 U.S. at 829 n.6:

The difference [between the specified liability losses (SLLs) at issue

here and the product liability losses (PLLs) involved in that case] does

not matter. The PLL was a statutory predecessor to the SLL, and PLLs

were folded into the SLL provision in § 11811(b)(1) of the Omnibus

Budget Reconciliation Act of 1990, [Pub. L. No. 101-508,] 104 Stat.

[1338,] 1388–532. Thus, “[i]n all relevant respects, the provisions on

[PLLs] and SLLs are the same.” Leatherman, Current Developments

for Consolidated Groups, 486 PLI/Tax 389, 393, n. 5 (2000) . . . .

to its normal net operating losses. We conclude it was. The text of

section 172, its structure, the context in which it developed, judicial

precedent interpreting it, and even the Government’s past

interpretation of the statute as expressed in regulations all point in

favor of Apache’s position. We will therefore grant Apache’s Motion and

deny the Commissioner’s.

Background

Apache is an oil and gas exploration and production company

organized under Delaware law. When it filed its Petition, Apache’s

principal place of business was in Houston, Texas.

During 2016 and 2017, Apache was the common parent of an

affiliated group. That group filed a consolidated calendar year

Form 1120, U.S. Corporation Income Tax Return, for both years.

2016 Tax Returns

Apache timely filed Form 1120 for the taxable year 2016 on

September 21, 2017, having requested an extension. On October 13,

2017, Apache filed a superseding Form 1120.

On both its initial and superseding Forms 1120 for 2016, Apache

reported a net operating loss of $1,931,356,691. Within that amount,

Apache reported that $40,734,363 qualified as a specified liability loss

within the meaning of section 172(f)(1). The parties have stipulated that

Apache did not claim any of its 2016 specified liability loss as product

liability amounts under section 172(f)(1)(A).

Apache included the following statement on its initial and

superseding Forms 1120 for 2016:

ELECTION TO FOREGO NET OPERATING LOSS

CARRYBACK PURSUANT TO INTERNAL REVENUE

CODE § 172(b)(3) AND TREAS. REG. § 1.1502-21(b)(3)

This is an election under § 1.1502-21(b)(3)(i) to waive the

entire carryback period pursuant to section 172(b)(3) for

the 2016 CNOLs of the consolidated group of which Apache

Corporation (EIN . . . ) is the common parent.

Apache Corporation and Subsidiaries does not elect to

relinquish the carryback period with respect to specified

liability losses incurred in this tax year ended

December 31, 2016 pursuant to Internal Revenue Code

§ 172(f)(6).

Ex. 1-J, p. 244; Ex. 2-J, p. 243.

On October 6, 2017—between the filing of its initial and

superseding Forms 1120—Apache filed Form 1139, Corporation

Application for Tentative Refund, seeking to carry its $40,734,363

specified liability loss back ten years to its tax year 2006. As a result,

on Form 1139, it claimed a refund of $13,829,316. Apache received a

tentative refund of that amount in January 2018.

II.

2017 Tax Returns

Apache timely filed Form 1120 for the taxable year 2017 on

October 10, 2018, having requested an extension. On October 15, 2018,

it filed a superseding Form 1120.

On its initial and superseding Forms 1120 for 2017, Apache

reported a net operating loss of $3,082,583,587. Apache claimed that

$30,818,137 of that amount qualified as a specified liability loss. The

parties have stipulated that Apache did not claim any of its specified

liability loss as product liability amounts under section 172(f)(1)(A).

Apache included on its initial and superseding Forms 1120 for

2017 a statement almost identical to its 2016 statement. The statement

elected to waive Apache’s net operating loss carryback period but not

the carryback period with respect to its specified liability loss.

On December 12, 2018, Apache filed Form 1139, seeking to carry

its reported specified liability loss of $30,818,137 back from 2017 to

2007. As a result, it claimed a refund of $10,139,167 for the 2007 taxable

year. Apache received a tentative refund of that amount in March 2019.

III.

Examination and Petition

The Commissioner examined Apache’s 2016 and 2017 returns.

On September 26, 2022, the Commissioner issued to Apache a Notice of

Deficiency relating to the taxable years 2006, 2007, and 2015. 4

Form 886–A, Explanation of Items, attached to the Notice stated:

It is determined that specified liability losses (SLL) within

the meaning of section 172(f) reported in years 2016 and

2017 and carried back ten years to 2006 and 2007 are

disallowed. The taxpayer elected to forgo the entire

carryback under section 172(b)(3) for both 2016 and 2017

and is not allowed to separately carry back the SLL net

operating losses (NOL).

Ex. 7-J, p. 24.

Apache timely petitioned this Court for redetermination of its

deficiencies. In time, Apache and the Commissioner filed the CrossMotions for Partial Summary Judgment now before the Court. Apache

seeks a ruling that it properly carried back its claimed specified liability

losses to 2006 and 2007. The Commissioner seeks a ruling that Apache’s

elections under section 172(b)(3) relinquished the carryback period for

its claimed specified liability losses as well as the remainder of its net

operating losses, and thus that Apache could not separately carry its

claimed specified liability losses to 2006 and 2007.

Discussion

Summary Judgment Standard

The purpose of summary judgment is to expedite litigation and

avoid costly and unnecessary trials. FPL Grp., Inc. & Subs. v.

Commissioner, 116 T.C. 73, 74 (2001). The Court may grant partial

summary judgment when there is no genuine dispute as to any material

fact and the movant is entitled to judgment as a matter of law.

Rule 121(a)(2); Elec. Arts, Inc. v. Commissioner, 118 T.C. 226, 238

(2002); see also Take v. Commissioner, 82 T.C. 630, 633 (1984)

(explaining that if both parties move for summary judgment or partial

summary judgment, this rule applies to each motion), aff’d, 804 F.2d 553

(9th Cir. 1986). In considering the Motions, the Court construes factual

materials and inferences drawn from them in the light most favorable

to each nonmoving party. Sundstrand Corp. v. Commissioner, 98 T.C.

518, 520 (1992), aff’d, 17 F.3d 965 (7th Cir. 1994).

4 The deficiency determined with respect to taxable year 2015 is not implicated

by the Motions now before us, and we do not discuss it further.

II.

Net Operating Loss Carryover Deductions

In General

Section 172(a) allows as a deduction for a taxable year an amount

equal to the aggregate of (1) the net operating loss carryovers to that

year and (2) the net operating loss carrybacks to the year. See Metro

One Telecomms., Inc. v. Commissioner, 704 F.3d 1057, 1059–60 (9th Cir.

2012), aff’g 135 T.C. 573 (2010); Powers v. Commissioner, 43 F.3d 172,

176 (5th Cir. 1995), aff’g in part, rev’g in part, and remanding T.C.

Memo. 1993-125 and 100 T.C. 457 (1993).

Section 172(b) defines net operating loss carryovers and

carrybacks and provides rules for when they may be taken into account.

Section 172(b) consists of three paragraphs.

Section 172(b)(1) sets out the years to which a net operating loss

may be carried. As we have noted, as a general rule, net operating losses

may be carried back 2 years and forward 20. I.R.C. § 172(b)(1)(A).

Special rules exist, however, for specific types of losses. See I.R.C.

§ 172(b)(1)(B)–(F). Farming losses, for example, may be carried back

five years and may not be carried forward. I.R.C. § 172(b)(1)(F).

“Eligible losses” may be carried back three years, I.R.C. § 172(b)(1)(E), 5

and specified liability losses may be carried back ten years, I.R.C.

§ 172(b)(1)(C).

Section 172(b)(2) provides rules for determining the order of years

to which a net operating loss will be carried. To start, the taxpayer

carries the entire amount of a net operating loss to the earliest year to

which it may be carried. I.R.C. § 172(b)(2). If the net operating loss

exceeds taxable income for that year, then the excess of the loss over

taxable income is carried to the following year, and so on until the loss

is entirely consumed or may no longer be carried over. Id.

Section 172(b)(3) permits a taxpayer an election not to carry back

a net operating loss. In relevant part, it provides: “Any taxpayer entitled

to a carryback period under paragraph (1) [i.e., section 172(b)(1),

described above] may elect to relinquish the entire carryback period

with respect to a net operating loss for any taxable year.” I.R.C.

5 Generally speaking, “eligible losses” are losses from theft, fires, storms,

shipwrecks, and other casualties incurred by individuals, as well as net operating

losses attributable to federally declared disasters incurred by small businesses or

farmers. See I.R.C. § 172(b)(1)(E)(ii).

§ 172(b)(3). This is the main provision at issue here, but before

analyzing it in greater detail, we pause briefly to discuss specified

liability losses, the category of losses Apache seeks to carry back.

Specified Liability Losses

A specified liability loss belongs to a category of losses subject to

special rules under section 172(b). See I.R.C. § 172(b)(1)(C), (f).

Section 172(f)(1) defines a specified liability loss to include (1) losses

attributable to product liability, I.R.C. § 172(f)(1)(A), as well as

(2) amounts that satisfy a liability under state or federal law relating to

the reclamation of land, the decommissioning of a nuclear power plant,

the dismantlement of a drilling platform, the remediation of

environmental contamination, or payments under a workers

compensation act, subject to certain timing and accounting conditions,

I.R.C. § 172(f)(1)(B). The losses at issue here fall in the second category.

As we have noted, specified liability losses can be carried back for

ten years. I.R.C. § 172(b)(1)(C). But, in addition to the election under

section 172(b)(3) at issue here (relinquishing the entire carryback

period), taxpayers may make another special election regarding the tenyear carryback: “Any taxpayer entitled to a 10-year carryback under

subsection (b)(1)(C) from any loss year may elect to have the carryback

period with respect to such loss year determined without regard to

subsection (b)(1)(C).” I.R.C. § 172(f)(6). That is, although specified

liability losses are, by default, carried back 10 years, a taxpayer may opt

to carry them back 2 years and forward 20, following the general rule

for net operating losses.

Finally, specified liability losses are taken into account under

section 172(b)(2) (sequencing the years to which a loss will be carried)

according to a special rule. Section 172(f)(5) provides that “[f]or

purposes of applying subsection (b)(2), a specified liability loss for any

taxable year shall be treated as a separate net operating loss for such

taxable year to be taken into account after the remaining portion of the

net operating loss for such taxable year.”

III.

Application to Apache’s Carrybacks

The issue before us is whether, under section 172(b)(3), Apache

may relinquish the carryback period for one portion of its net operating

loss (the general portion, which has a two-year carryback period under

section 172(b)(1)(A)), while retaining the carryback period for another

portion of its net operating loss (the portion constituting a specified

liability loss, which has a ten-year carryback period under

section 172(b)(1)(C)). Based on the text, structure, and context of the

statute, as well as caselaw, history, and the Government’s own prior

position, we conclude that it may.

Multiple Carryback Periods

Statutory Text, Structure, and Context

“As with any question of statutory interpretation, our analysis

begins with the plain language of the statute.” Jimenez v. Quarterman,

555 U.S. 113, 118 (2009) (citing Lamie v. U.S. Tr., 540 U.S. 526, 534

(2004)); see also Universal Seismic Assocs., Inc. v. Harris Cnty. (In re

Universal Seismic Assocs., Inc.), 288 F.3d 205, 207 (5th Cir. 2002) (“[I]n

any case of statutory interpretation, we look to the plain language of the

statute, reading it as a whole and mindful of the linguistic choices made

by Congress.” (quoting Whatley v. Resol. Tr. Corp., 32 F.3d 905, 909 (5th

Cir. 1994))).

Section 172(b)(3)

As we have already noted, section 172(b)(3) provides, in relevant

part, as follows: “Any taxpayer entitled to a carryback period under

paragraph (1) may elect to relinquish the entire carryback period with

respect to a net operating loss for any taxable year.” The text of the

provision identifies first who may make an election—“Any taxpayer

entitled to a carryback period under paragraph (1)”—and then what the

election permits the taxpayer to do—“to relinquish the entire carryback

period.” I.R.C. § 172(b)(3). It is constructed such that “the entire

carryback period” refers back to “a carryback period under

paragraph (1)” to which the taxpayer is entitled.

Section 172(b)(1)

We turn, therefore, to section 172(b)(1) to determine what

carryback period or periods it provides to taxpayers. The Dictionary Act

makes clear that “words importing the singular include and apply to

several persons, parties, or things” unless context indicates otherwise.

1 U.S.C. § 1; see also Niz-Chavez v. Garland, 593 U.S. 155, 164–65 (2021)

(“Suppose a statute made it a crime to vandalize ‘a’ bank. Under the

Dictionary Act, someone who vandalizes five banks could not avoid

prosecution on the ground that he vandalized more than one.”). Thus,

the reference to “a carryback period” in section 172(b)(3) would be

consistent with multiple carryback periods if section 172(b)(1) provides

for such periods, which as we will see in a moment it does.

Section 172(b)(1) is titled “Years to which loss may be carried,”

and it sets out carrybacks of varying lengths for different portions of a

net operating loss. As we have discussed, under the general rule in

section 172(b)(1) a net operating loss may be carried back for two years.

I.R.C. § 172(b)(1)(A)(i) (providing that a net operating loss “shall be a

net operating loss carryback to each of the 2 taxable years preceding the

taxable year of such loss”). There is no carryback for a so-called REIT

year. I.R.C. § 172(b)(1)(B)(i). In addition, the carryback is ten years for

specified liability losses, I.R.C. § 172(b)(1)(C), variable for excess

interest losses, I.R.C. § 172(b)(1)(D), three years for eligible losses, I.R.C.

§ 172(b)(1)(E), and five years for farming losses, I.R.C. § 172(b)(1)(F).

By our count, paragraph (1) of section 172(b) establishes at least

six potential carrybacks of different lengths. The same taxpayer could

be entitled to several of these in the same year. This fact strongly

suggests that paragraph (1) establishes distinct “carryback periods”—

i.e., multiple carryback periods—for purposes of the election in

section 172(b)(3).

Of course, paragraph (1) refers to “carryback[s]” rather than

“carryback periods” and the term “carryback period” is not defined by

the Code. But the term’s ordinary meaning confirms that paragraph (1)

establishes distinct carryback periods.

When the statute does not define a term, “we ask what that term’s

‘ordinary, contemporary, common meaning’ was when Congress enacted

[the relevant provision].” Food Mktg. Inst. v. Argus Leader Media, 588

U.S. 427, 433–34 (2019) (quoting Perrin v. United States, 444 U.S. 37,

42 (1979)); see also Dynamo Holdings Ltd. P’ship. v. Commissioner, 150

T.C. 224, 234 (2018) (reviewed).

A period is a division of time. See Period, Merriam Webster’s

Collegiate Dictionary (10th ed. 1993) (“a chronological division”); Period,

Black’s Law Dictionary (6th ed. 1990) (“Any point, space, or division of

time.”); Period, The Random House Dictionary of the English Language

(2d ed. 1987) (“any specified division or portion of time”); Period, The

American Heritage Dictionary of the English Language (1st ed. 1969)

(“1. An interval of time characterized by the occurrence of certain

conditions or events.”). And a carryback is a loss amount that can be

deducted for prior years. See Carry-back, Black’s Law Dictionary (6th

ed. 1990) (“A provision in the tax law which allows a taxpayer to apply

a net operating loss in one year to the three immediately preceding tax

years, beginning with the earliest year.”); Carryback, The Random

House Dictionary of the English Language (2d ed. 1987) (“(in U.S.

income-tax law) a special provision allowing part of a net operating loss

or of an unused credit in a given year to be apportioned over one or two

preceding years, chiefly in order to ease the tax burden”); cf. Carryover,

Merriam Webster’s Collegiate Dictionary (10th ed. 1993) (“something

retained or carried over”); Carryover, The American Heritage Dictionary

of the English Language (1st ed. 1969) (“1. A part or quantity, as of

goods or commodities, left over or held for future use. 2. Accounting. A

sum transferred to a new column, page, book, or account.”). A carryback

period, then, is a division of time to which a loss amount can be carried

back. 6

Given this definition, the ordinary meaning of the term

“carryback period” corresponds precisely with the content of

section 172(b)(1). Each of the subparagraphs of section 172(b)(1)

discussed above sets out a different division of time (whether two, three,

five, or ten years) in which a loss amount may be carried back.

Therefore, each of these divisions of time constitutes a distinct carryback

period to which a taxpayer is “entitled . . . under paragraph (1)” within

the meaning of section 172(b)(3).

Section 172(f)(5)

The structure of section 172—especially section 172(f)(5) and

analogous provisions—supports this reading as well. A taxpayer has

only one net operating loss for each year, and section 172(b)(2), which

sequences the years to which a loss is carried, provides a rule that

applies to “[t]he entire amount” of that net operating loss. For a portion

of a net operating loss to be carried back separately under

section 172(b)(2), therefore, a special rule is required. Section 172(f)(5)

provides that rule for specified liability losses: “For purposes of applying

subsection (b)(2), a specified liability loss for any taxable year shall be

treated as a separate net operating loss for such taxable year . . . .”

6 The meanings of these terms have not changed since the precursor to

section 172(b)(3) was enacted. See Period, Black’s Law Dictionary (5th ed. 1979);

Period, The Random House College Dictionary (1980) (“any specified division or portion

of time”); Carry-back, Black’s Law Dictionary (5th ed. 1979) (“Provision in tax law

which permits taxpayer to apply net operating loss in one year to recomputation of tax

of several preceding taxable years.”); Carryover, The Random House College Dictionary

(1980) (“that which is carried over, as to a later time, account, etc.”).

(Emphasis added.) Analogous provisions exist for eligible losses and

farming losses. I.R.C. § 172(b)(1)(E)(iv), (h)(2).

Additional Context

By contrast, no rule similar to that of section 172(f)(5) is required

for section 172(b)(3), because the latter provision, together with

section 172(b)(1), already contemplates multiple carryback periods

working in tandem. Additionally, given that section 172(f)(5) and

similar rules signal that portions of net operating losses are meant to be

treated separately from the rest of the net operating loss—i.e., given

that under those provisions and under section 172(b)(1) the losses are

treated as separate losses and carried back for a different number of

years—it is logical that those portions would have separate carryback

periods as well.

This analysis suffices to conclude that a taxpayer may be entitled

to multiple carryback periods under section 172(b)(1) and thus for

purposes of section 172(b)(3). 7 But there is more.

Judicial Interpretations of Section 172

Perhaps unsurprisingly given the discussion above, two decisions

from the courts of appeals, and one from this Court, confirm that

section 172(b)(1) sets out different carryback periods for different types

of losses. In NextEra Energy, Inc. v. United States, 893 F.3d 1353, 1356

(11th Cir. 2018), the U.S. Court of Appeals for the Eleventh Circuit

wrote that “certain types of net operating losses are allowed a longer

carryback period.” Continuing, it noted that “[a]t all times relevant to

this case, Section 172(f) of the tax code provided for one of the extended

carryback periods. This section defined a ‘specified liability loss,’ which

had a carryback period of ten years.” Id. (footnote omitted) (citing I.R.C.

§ 172(b)(1)(C), (f)).

7 Plumb v. Commissioner, 97 T.C. 632 (1991), supports this reading. In Plumb,

we determined that a taxpayer could not relinquish the carryback period for his

regular net operating loss while maintaining the carryback period for his alternative

minimum tax net operating loss. To arrive at that conclusion, we reasoned that “[t]he

statute deals with but a single carryback period of 3 years. An effective election under

section 172(b)(3)(C) must of necessity relate to that carryback period, and would

preclude any carryback whether it be the regular NOL or the alternative minimum tax

NOL.” Plumb, 97 T.C. at 638. What we face here is not the single carryback period

present in Plumb, but multiple carryback periods. Thus, the reasoning in Plumb

favors the conclusion we reach.

The U.S. Court of Appeals for the Tenth Circuit likewise has

pointed out that “[t]he tax code permits a longer carryback period for a

special category of losses, so-called ‘specified liability losses.’” Barrick

Res. (USA) Inc. v. United States, 529 F.3d 1252, 1254 (10th Cir. 2008).

“Unlike ordinary net operating losses, [specified liability] losses have a

ten-year carryback period.” Id. at 1258.

We ourselves have stated, in a case regarding bad debt losses

under prior law, that different losses can have different carryback

periods:

[G]enerally, the carryback period for a NOL is 3 years and

the carryover period is 15 years.[8] Section 172(b)(1)(L)

provides a special rule with respect to the bad debt losses

of commercial banks: The portion of the NOL of a

commercial bank that is attributable to bad debt losses is

prescribed a carryback period of 10 years and carryover

period of 5 years.

Norwest Corp. v. Commissioner, 111 T.C. 105, 164 (1998). Each of these

decisions strongly supports the view that section 172(b)(1) sets out

different carryback periods for different types of losses.

Of course, NextEra Energy, Barrick Resources, and Norwest did

not address head-on the question of whether different carryback periods

can be relinquished independently under section 172(b)(3). But they

reflect the considered judgment of those courts as to how the text of

section 172 operates; that is, they confirm that section 172(b)(1) sets out

different carryback periods for different types of losses. And they

therefore inform the proper interpretation of section 172(b)(3). We see

no reason for ignoring or rejecting the views of two courts of appeals and

our precedent in pursuit of some other interpretation.

Legislative History

Finally, “[f]or those who consider legislative history relevant,”

Warger v. Shauers, 574 U.S. 40, 48 (2014), this reading of the statute is

supported by statements that were made in connection with the 1997

amendments to section 172. Those amendments (1) lengthened the

default carryforward period from 15 years to 20 years, (2) shortened the

default carryback period from 3 years to 2 years, and (3) nevertheless

8 These were the applicable periods before Congress amended the statute in

1997 to change the carryback period to 2 years and the carryover period to 20 years.

provided 3 years for certain portions of net operating losses related to

casualty losses. See Taxpayer Relief Act of 1997, Pub. L. No. 105-34,

§ 1082, 111 Stat. 788, 950.

The relevant congressional reports explained that the carryback

provisions were intended to address typical business cycles, but that

“allowing a two-year carryback of NOLs is sufficient to account for these

business cycles,” in part because “certain deductions . . . are granted

special, longer carryback periods under present law (which are retained

by the bill).” S. Rep. No. 105-33, at 184 (1997), reprinted in 1997-4 C.B.

(Vol. 2) 1067, 1264 (emphasis added). And it further explained: “The bill

does not apply to NOLs arising from casualty losses of individual

taxpayers.” Id.; see also H.R. Rep. No. 105-148, at 498–99 (1997),

as reprinted in 1997 U.S.C.C.A.N. 678, 892–93 (providing similarly);

Staff of J. Comm. on Tax’n, 105th Cong., General Explanation of Tax

Legislation Enacted in 1997, JCS-23-97, at 268 (J. Comm. Print 1997)

(“The Act does not apply to the carryback rules relating to REITs,

specified liability losses, excess interest losses, and corporate capital

losses.”); H.R. Rep. No. 105-220, at 585 (1997) (Conf. Rep.), reprinted in

1997-4 C.B. (Vol. 2) 1457, 2055 (“In addition, the Senate amendment

preserves the 3-year carryback for NOLs of farmers and small

businesses attributable to losses incurred in Presidentially declared

disaster areas. . . . The conference agreement follows the Senate

amendment.”).

These statements are consistent with the understanding that

there can be different carryback periods for a year, that they operate

independently of each other, and that taxpayers were expected to be able

to continue to avail themselves of the special extended carryback periods

in section 172(b)(1), even as the default shifted toward carryforwards.

Relinquishing Individual Carryback Periods

Having concluded that section 172(b)(1) sets out distinct

carryback periods for different kinds of losses, and thus that a taxpayer

may be entitled to multiple carryback periods under section 172(b)(1) for

the same year, we now explain why it follows that section 172(b)(3)

permits the taxpayer to relinquish those carryback periods individually,

as Apache did here.

Text of Section 172(b)(3)

Section 172(b)(3) allows a taxpayer to “relinquish the entire

carryback period with respect to a net operating loss for any taxable

year.” As discussed in Part III.A above, “the entire carryback period”

refers to “a carryback period under paragraph (1)” to which the

applicable taxpayer is entitled. I.R.C. § 172(b)(3); see also MCR Oil

Tools, L.L.C. v. U.S. Dep’t of Transp., 110 F.4th 677, 692 (5th Cir. 2024)

(“‘The,’ by . . . contrast [to ‘a’], ‘indicat[es] that a following noun or noun

equivalent is definite or has been previously specified by context.”

(quoting Nielson v. Preap, 586 U.S. 392, 408 (2019))). Thus, “the entire

carryback period” that may be relinquished under section 172(b)(3) is

the carryback period to which the taxpayer is entitled under

section 172(b)(1).

When a taxpayer is entitled to multiple carryback periods under

section 172(b)(1), section 172(b)(3) applies to each individual period,

such that the taxpayer may elect to retain or relinquish the period

independent of the others. 9 See Niz-Chavez, 593 U.S. at 164 (“[A] statute

using the singular ‘a’ can apply to multiple persons, parties, or things.”);

Commissioner v. Kelley, 293 F.2d 904, 912 (5th Cir. 1961) (“The

indefinite article ‘a’ says in plain language that there may be two or

more substantial parts.”), aff’g 32 T.C. 135 (1959).

Reading section 172(b)(3) as providing a taxpayer with an all or

nothing election—relinquish each and every one of the periods set out in

section 172(b)(1) or be stuck with all of them—makes little sense given

the number of different carryback periods set out in section 172(b)(1). It

also makes little sense in view of Congress’s going out of its way to give

taxpayers additional choices when it comes to specified liability losses,

see I.R.C. § 172(f)(6), eligible losses, see I.R.C. § 172(b)(1)(E)(iv), and

farming losses, see I.R.C. § 172(h)(2). 10 The Government itself

recognized as much when interpreting a prior version of the statute.

An interpretation requiring collective relinquishment would make little

sense. Consider the following example of a rule with similar wording:

Any employee entitled to a day of sick leave under paragraph (1) may

elect to donate the entire day of sick leave with respect to any

employment year to another employee.

There is no reason to read this rule to require an employee to donate either all of his

or her days of sick leave together or none at all. Rather, the best reading of the text is

that the employee may decide to donate each day individually, so that the employee

can donate no sick leave or one or more days of sick leave at his or her option. But the

employee may not donate just some hours of leave from a particular day.

10 The Court’s reasoning in Plumb also cuts in favor of Apache here. In Plumb,

97 T.C. at 638, only one carryback period existed for the taxpayer to relinquish, and

The Government’s Own Interpretation

The Secretary read paragraphs (1) and (3) of section 172(b) to

permit an election with respect to losses with one carryback period and

not others when promulgating Treasury Regulation § 1.172-13. That

regulation was promulgated before Congress adopted the 1990

amendments to section 172. See United Dominion, 532 U.S. at 829 n.6

(discussing amendments). The regulation was finalized in 1986. T.D.

8096, 1986-2 C.B. 39, 51 Fed. Reg. 30,481 (Aug. 27, 1986). It addresses

product liability losses, a category that was later made part of a

taxpayer’s specified liability loss by section 172(f)(1)(A). See United

Dominion, 532 U.S. at 829 n.6. With respect to the section 172(b)(3)

election (which, in 1986, was housed in section 172(b)(3)(C)), the

regulation provides:

If a taxpayer sustains during the taxable year both a net

operating loss not attributable to product liability and a

product liability loss . . . , an election pursuant to

section 172(b)(3)(C) (relating to election to relinquish the

entire carryback period) does not preclude the product

liability loss from being carried back 10 years . . . .

Treas. Reg. § 1.172-13(c)(4). 11 That regulation has not been rescinded.

If Apache had claimed a specified liability loss under section 172(f)(1)(A)

thus his election relinquished the whole carryback period for both regular taxes and

the alternative minimum tax. But nothing in the Court’s reasoning in Plumb requires

that only one carryback period can exist, or that the text of section 172(b)(3) requires

that all carryback periods be relinquished together. Instead, Plumb is perfectly

consistent with the possibility of multiple carryback periods and elections with respect

to each.

11 The regulation was adopted in response to a comment that posed precisely

the question now before the Court: “If a taxpayer has both a net operating loss

carryback and a product liability loss carryback, and elects to forego the carryback of

the net operating loss pursuant to section 172(b)(3)(C), the question is whether the

product liability loss can still be carried back ten years under section 172(b)(1)(I).”

Pet’r’s Mot. for Partial Summ. J. Ex. B (Doc. 36) (Letter from R. Brown, Peat, Marwick,

Mitchell & Co. to the Internal Revenue Service (Aug. 12, 1983)). The commenter

answered the question in the affirmative. See id. (“We believe the answer should be

yes.”).

The Treasury Department and the IRS agreed:

Another commentator suggested that the final regulations be

clarified with respect to the interaction of the election under

section 172(b)(3)(C) (relating to election to relinquish the entire

instead of section 172(f)(1)(B), the Commissioner would be bound to

permit Apache’s carryback.

Moreover, there is no meaningful principle by which to justify

treating product liability losses under section 172(f)(1)(A) differently, for

purposes of the carryback period election, from other specified liability

losses under section 172(f)(1)(B). Congress joined both categories

together in 1990, and their carryback periods are provided by the same

subparagraph of section 172(b)(1). “Thus, in all relevant respects, the

provisions on PLLs and SLLs are the same.” United Dominion, 532 U.S.

at 829 n.6 (cleaned up).

Additional Considerations

In addition, courts assume that Congress was aware of the

product liability loss regulation when it adopted the specified liability

loss concept in 1990. See Bragdon v. Abbott, 524 U.S. 624, 645 (1998);

see also Antonin Scalia & Brian A. Garner, Reading Law: The

Interpretation of Legal Texts 322–26 (2012) (discussing the priorconstruction canon). As we have already noted, the regulation

applicable to product liability losses was finalized in 1986. Four years

later, Congress folded product liability losses into specified liability

losses, expanding the category of losses eligible for the ten-year

carryback period. While the presence of the regulation may not be

sufficient to invoke a strong form of the prior-construction or ratification

canon, it certainly appears that, when Congress amended section 172, it

made no effort to reject the administrative interpretation of the text that

became section 172(b)(3).

Nor are we aware of any policy reason indicating that Congress

wished to tie the hands of taxpayers who had multiple carryback periods

under section 172(b)(1). By adopting the predecessor of section 172(b)(3)

in the first instance, Congress demonstrated that it was sensitive to

taxpayers facing a retroactive loss of favorable tax attributes because of

future losses and wished to ameliorate their position.

The

carryback period) and the election under section 172(j)(3) (relating to

election to forgo 10-year product liability loss carryback period). The

final regulations are clarified by providing in § 1.172-13(c)(4) that the

election pursuant to section 172(b)(3)(C) does not preclude a product

liability loss from being carried back 10 years.

Preamble, T.D. 8096, 1986-2 C.B. at 39, 51 Fed. Reg. at 30,481. The “election under

section 172(j)(3)” referenced in the preamble was similar to the election now provided

by section 172(f)(6), discussed above.

Commissioner offers no valid reason why Congress would be stingy in

its solution and make the election all or nothing, regardless of how many

carryback periods a taxpayer had under section 172(b)(1).

As far as we can tell, the best the Commissioner can come up with

is a claim of administrative inconvenience. In the Commissioner’s

telling, it would be challenging to track which carryback periods a

taxpayer has relinquished and which it has retained. The argument

does not persuade. Section 172(b)(1) is clear in the carryback periods it

establishes. And a taxpayer who wishes to relinquish one or more

specific periods must do so clearly (for example, by expressly crossreferencing the subparagraph under section 172(b)(1) that it wishes to

relinquish). If the taxpayer makes no specific reference to one or more

specific carryback periods in its election, the Commissioner would be

entitled to treat the election as applying to all of the carryback periods

to which the taxpayer is otherwise entitled.

In any event, the Commissioner already needs to track separately

whether a taxpayer has retained its original carryback period for

specified liability losses or has given that period up in favor of the

general carryback rule. Continuing to track similar choices under

section 172(b)(3) would not appear to present any undue administrative

hardship.

Application

In view of the foregoing, we conclude that Apache was permitted

to elect to relinquish the two-year carryback period for its standard net

operating loss without waiving the ten-year carryback for its specified

liability loss. Accordingly, the relief it seeks in its Motion must be

granted.

IV.

Tiebreaking Principle

To our mind, the foregoing analysis compels us to grant Apache’s

Motion. Even if the interpretative question before us is viewed as a close

call, however, longstanding precedent would instruct us to construe the

relevant provisions against the Commissioner. See, e.g., Gould v. Gould,

245 U.S. 151, 153 (1917) (“In case of doubt [statutes levying taxes] are

construed most strongly against the government, and in favor of the

citizen.”); United States v. Merriam, 263 U.S. 179, 187–88 (1923)

(applying the principle set out in Gould and noting with approval that

under English law “if the crown, seeking to recover the tax, cannot bring

the subject within the letter of the law, the subject is free, however

apparently within the spirit of the law the case might otherwise appear

to be” (quoting Partington v. Att’y Gen., L.R. 4 H.L. 100, 122 (1869))); see

also, e.g., Security Bank Minn. v. Commissioner, 994 F.2d 432, 436 (8th

Cir. 1993) (interpreting complex interrelated statutory provisions and

observing that “when there is a reasonable doubt about the meaning of

a revenue statute, the doubt is resolved in favor of those taxed”), aff’g 98

T.C. 33 (1992); Leavell v. Blades, 141 S.W. 893, 894 (Mo. 1911) (“When

the tax gatherer puts his finger on the citizen, he must also put his finger

on the law permitting it”).

At least one current member of the Supreme Court has applied

this principle to the very statutory provision now before the Court. See

United Dominion, 532 U.S. at 839 (Thomas, J., concurring) (“At a bare

minimum, in cases such as this one, in which the complex statutory and

regulatory scheme lends itself to any number of interpretations, we

should be inclined to rely on the traditional canon that construes

revenue-raising laws against their drafter.”). To the extent this case

presents a close question of interpretation, section 172 should be

construed in favor of Apache.

A Brief Response to the Dissent

The opinion concurring in part and dissenting in part (for

convenience, dissent) appears to premise its conclusion in significant

part on the fact that “[i]n 1976, when Congress enacted the carryback

waiver rule that now appears in section 173(b)(3), an election under that

rule was necessarily an all-or-nothing matter.” See Halpern dissenting

op. p. 25. And, in the dissent’s view, “Congress has given no indication

that the rule that started out all-or-nothing has not remained all-ornothing.” See Halpern dissenting op. p. 25.

We do not share the dissent’s view of how the statute as it existed

in 1976 worked. But, in any event, as the Supreme Court has said, “[t]he

starting point in discerning congressional intent is the existing

statutory text, . . . and not the predecessor statutes.” Lamie, 540 U.S.

at 534 (emphasis added). We recently recognized the same point, see

United Therapeutics Corp. v. Commissioner, 160 T.C. 491, 507 (2023)

(noting that predecessor statutes may not be used to create ambiguity),

and were affirmed by the U.S. Court of Appeals for the Fourth Circuit,

United Therapeutics Corp. v. Commissioner, 105 F.4th 183, 189 (4th Cir.

2024) (“Predecessor statutes, in other words, may not be used to

manufacture ambiguity.”).

The years before us in this case are 2016 and 2017. The relevant

provisions—section 172(b)(1), (2), and (3), as well as section 172(f)—

were all amended after 1976 and before 2016, including a full

reenactment of section 172(b) and (f) in 1990. Omnibus Budget

Reconciliation Act of 1990 § 11811, 104 Stat. at 1388–530. Thus, while

the text of the statute in 1976 offers historical context, it is not our focus.

And, as we have explained, our own Court, courts of appeals,

Congressional committees, and even the Government itself have read

the post-1976 statutory provisions as we do.

The dissent also misreads section 172(f)(6).

As we have

explained, exemplifying Congress’s solicitude for taxpayers who

experience specified liability losses, that provision gives such taxpayers

the choice to elect to waive the ten-year carryback under

section 172(b)(1)(C). But the election does not eliminate the other

carryback periods listed in section 172(b)(1) that might be available to

those taxpayers. And whatever inference might arise from the text of

section 172(f)(6) does not suffice to overcome the other textual indicators

we have discussed, especially when, as the dissent seems to

acknowledge, the reference to “any loss year” included there served

largely as an effective date provision. See Revenue Act of 1978, Pub. L.

No. 95-600, § 371(a)(1), 92 Stat. 2763, 2859 (defining the term “loss year”

as “a taxable year beginning after September 30, 1979”).

VI.

Conclusion

Section 172(b)(1)(C) provides a separate carryback period for

specified liability losses. And section 172(b)(3) permits a taxpayer to

relinquish “a carryback period” to which it is entitled, without specifying

that all carryback periods for a given year must be relinquished

together. Apache therefore was able to relinquish its normal net

operating loss carryback period while retaining the ten-year carryback

period for its specified liability loss. We will therefore grant Apache’s

Motion and deny the Commissioner’s.

To reflect the foregoing,

An appropriate order will be issued.

Reviewed by the Court.

URDA, C.J., and KERRIGAN, NEGA, PUGH, ASHFORD,

COPELAND, JONES, GREAVES, WEILER, WAY, LANDY, ARBEIT,

GUIDER, JENKINS, and FUNG, JJ., agree with this opinion of the

Court and BUCH, J., agrees with Part IV.

part.

MARSHALL and HALPERN, JJ., concur in part and dissent in

BUCH, J., concurring: We are confronted with a question of

statutory interpretation with no clear answer. Congress wrote that a

taxpayer “may elect to relinquish the entire carryback period with

respect to a net operating loss for any taxable year.” I.R.C. § 172(b)(3).

And we are attempting to determine what Congress meant by its use of

the indefinite article “a.” Did it choose to refer to “a net operating loss”

because there is only one net operating loss? If so, why did Congress

choose an indefinite article instead of the definite article “the?” Or did it

choose to refer to “a net operating loss” because the election to relinquish

the carryback is made separately with respect to any one of several

subtypes of net operating losses? The opinion of the Court and the

dissent do an admirable job of wading through the evolution of the

statute, the legislative history (for those who consider it to be relevant),

and the various semantic canons. And their conflicting answers are

equally plausible.

Where there is doubt as to the meaning of a taxing statute, we

have over a century of precedent that tells us how to resolve that doubt:

Taxing statutes are to be construed against the sovereign. Before there

was an income tax, courts were called upon to decide the scope of tariffs.

When effective dates were unclear, they were resolved against the

government. See, e.g., United States v. Wigglesworth, 28 F. Cas. 595, 597

(C.C.D. Mass. 1842) (No. 16,690) (“In every case, therefore, of doubt,

such statutes are construed most strongly against the government, and

in favor of the subjects or citizens, because burdens are not to be

imposed, nor presumed to be imposed, beyond what the statutes

expressly and clearly import.”) When it was unclear whether a

particular product fell within the definition of goods subject to a higher

or lower tariff, that doubt was resolved in favor of the importer. See, e.g.,

Am. Net & Twine Co. v. Worthington, 141 U.S. 468, 474 (1891) (“[W]e

should still feel obliged to resolve that doubt in favor of the importer,

since the intention of congress to impose a higher duty should be

expressed in clear and unambiguous language.”). When income taxes

came into effect, this principle remained the same when deciding what

fell within the definition of income. See, e.g., Gould v. Gould, 245 U.S.

151, 153 (1917) (“In the interpretation of statutes levying taxes it is the

established rule not to extend their provisions, by implication, beyond

the clear import of the language used, or to enlarge their operations so

as to embrace matters not specifically pointed out. In case of doubt they

are construed most strongly against the Government, and in favor of the

citizen.”).

The opinion of the Court and the dissent offer equally plausible

interpretations. “At a bare minimum, in cases such as this one, in which

the complex statutory and regulatory scheme lends itself to any number

of interpretations, we should be inclined to rely on the traditional canon

that construes revenue-raising laws against their drafter.” United

Dominion Indus., Inc. v. United States, 532 U.S. 822, 839 (2001)

(Thomas, J., concurring). For that reason, I join Part IV of the opinion

of the Court.

HALPERN, J., with whom MARSHALL, J., joins, concurring in

part and dissenting in part: I agree with the majority that the

Commissioner’s Motion for Partial Summary Judgment should be

denied. The Commissioner seeks a ruling that Apache relinquished the

carryback of its entire net operating loss (NOL) for each of 2016 and

2017. The election statements included with Apache’s returns for those

years, however, show that Apache intended to relinquish the carryback

of only part of its NOL for each year. Those statements cannot have

effected valid elections to relinquish the carryback of Apache’s NOLs

altogether. They were either valid elections to relinquish only part of

Apache’s NOL for each year—as Apache intended and the majority

holds—or they were invalid because Apache manifestly attempted to

make elections the law does not allow. See Plumb v. Commissioner, 97

T.C. 632, 640 (1991) (“[A] taxpayer who attempts to make an election

that is not legally available to him will be treated as having made no

election . . . .”); see also GWA, LLC v. Commissioner, T.C. Memo. 202534 (following Plumb). Either way, the Commissioner’s Motion should be

denied.

I disagree, however, with the majority’s disposition of Apache’s

Motion for Partial Summary Judgment. That Motion seeks a ruling that

Apache validly elected to relinquish the carryback of only part of its

NOL for each of 2016 and 2017. The election allowed by section

172(b)(3), as I read that provision, necessarily relinquishes the

carryback of the electing taxpayer’s entire NOL. Section 172(b)(3)

provides: “Any taxpayer entitled to a carryback period under [section

172(b)(1)] may elect to relinquish the entire carryback period with

respect to a net operating loss for any taxable year.” Because any NOL

has only one carryback period, an election under section 172(b)(3)

necessarily relinquishes the carryback of the taxpayer’s entire NOL.

Even if I were persuaded that a single NOL could have multiple

carryback periods, I would still read section 172(b)(3) to say that a

taxpayer entitled to one or more carryback periods can elect to

relinquish the carryback period or periods to which the taxpayer is

entitled.

Because Apache attempted to make an election legally

unavailable to it, its election was invalid. Apache’s Motion should also

be denied.

An NOL Has Only One Carryback Period.

In 1976, when Congress enacted the carryback waiver rule that

now appears in section 172(b)(3), an election under that rule was

necessarily an all-or-nothing matter. As Apache acknowledges, at that

time “a single taxpayer was not entitled to more than one carryback

period with respect to any one NOL.” Different taxpayers could carry

their losses back for different periods, but any given taxpayer’s NOL had

to be carried back a specified number of years. 1 That explains

Congress’s repeated use of the singular term “carryback period” in the

text of the waiver rule. Under the rule as initially enacted, a taxpayer

who elected to waive its carryback relinquished the carryback of its

entire NOL. While some aspects of the law have changed since 1976,

Congress has given no indication that the rule that started out all-ornothing has not remained all-or-nothing.

The possibility that portions of a single NOL could be carried back

to different years arose for the first time with the Revenue Act of 1978

(1978 Act), Pub. L. No. 95-600, 92 Stat. 2763. As part of that legislation,

Congress provided special rules for losses attributable to product

liability claims. As amended by the 1978 Act, section 172 allowed

“product liability losses” (PLLs) to be carried back ten years rather than

the usual three. 2

Once different portions of a single NOL could be carried back to

different years, did that NOL have different carryback periods?

Certainly, Congress did not say so explicitly. In fact, the predecessor to

section 172(f)(6), enacted in 1978, indicates that, after 1978, a single

NOL continued to have just one carryback period—even if different

portions of that NOL could be carried back to different years. 3

When Congress enacted the PLL rules, it allowed a taxpayer with

a PLL to waive the special ten-year carryback. Section 172(i)(3), as

enacted in 1978, provided: “Any taxpayer entitled to a 10-year

1 The majority does “not share” my view (and Apache’s) “of how the statute as

it existed in 1976 worked.” Op. Ct. p. 19. But the majority offers no explanation of

how its view differs from mine and Apache’s.

2 As the majority observes, in 1997 Congress revised the default rule so that

portions of an NOL not covered by a special rule could be carried back only two years.

3 The majority claims that I have “misread[] section 172(f)(6),” Op. Ct. p. 20,

but (again) offers no explanation of why, in its view, my reading of the provision is

incorrect.

carryback under subsection (b)(1)(H) from any loss year may elect to

have the carryback period with respect to such loss year determined

without regard to subsection (b)(1)(H).” 1978 Act § 371(b), 92 Stat.

at 2859 (emphasis added). (Section 172(b)(1)(H), the predecessor of

section 172(b)(1)(C), defined the term “loss year” to mean “a taxable year

beginning after September 30, 1979.” 1978 Act § 371(a), 92 Stat. at

2859. For present purposes, all these years later, we can treat “loss

year” as synonymous with “taxable year.”) Section 172(f)(6), as in effect

for the years in issue, provides the same waiver rule for taxpayers like

Apache with a specified liability loss (SLL), allowing them to elect to

“have the carryback period [for the] loss year determined without regard

to [section 172(b)(1)(C)].” If a taxpayer with a PLL that was part of a

larger NOL had two carryback periods (a ten-year period applicable to

the PLL and a three-year period applicable to the rest of the NOL),

Congress would have allowed the taxpayer to elect to have the carryback

period with respect to the PLL determined without regard to the ten-year

carryback rule. But that is not what section 172(i)(3) said (or what

section 172(f)(6) says). Instead, a taxpayer with a PLL or an SLL that

was part of a larger NOL could elect to have the carryback period with

respect to the taxable year determined without regard to the ten-year

carryback rule that would otherwise apply to the PLL or the SLL. That

shows that, even after 1978, a taxpayer that incurred an NOL for a

taxable year had just one carryback period for the year, and thus only

one carryback period for the NOL it incurred for the year.

If a single NOL had just one carryback period even after 1978, as

indicated by section 172(f)(6) and its predecessor, that would explain

why Congress left the text of the carryback waiver rule unchanged in

1978. The 1978 Act redesignated the carryback waiver provision

(moving it from section 172(b)(3)(E) to section 172(b)(3)(C)) but left its

text unchanged. 1978 Act § 703(p)(1)(B), 92 Stat. at 2943. It continued

to allow a taxpayer entitled to a carryback period (singular) to relinquish

the carryback period to which the taxpayer was entitled.

Even leaving aside the clear implication of section 172(i)(3), as

enacted in 1978, Congress’s failure to revise the carryback waiver rule

further supports the notion that Congress did not intend to allow a

taxpayer with a PLL that was part of a larger NOL to carry the PLL

back ten years while electing to forgo the carryback of the rest of its

NOL. If Congress had intended to allow an election to that effect,

applicable to only part of the taxpayer’s NOL, I would have expected

Congress to make that intention explicit by revising the text of the

carryback waiver rule. 4

This Court relied on similar reasoning in Plumb. In that case, we

addressed a purported election by taxpayers to forgo the carryback of

their regular tax NOL but not their alternative minimum tax (AMT)

NOL. We concluded that the law did not allow a “split” election to that

effect. “Had Congress intended to make available two elections, with

such potentially disparate results,” we reasoned, “one would certainly

have expected that it would have explicitly so stated in the [Tax Equity

and Fiscal Responsibility Act of 1982], which for the first time permitted

carrybacks and carryovers of alternative minimum tax NOLs.” Id.

at 638–39. We thus held that, “[i]n the absence of any such clear

expression of legislative intention in so complex a field, . . . there is but

a single election [to forgo the carryback of an NOL], and that an effective

election . . . must be applicable to both the regular NOL and the

alternative minimum tax NOL.” Id. at 639.

The same can be said about PLLs under the 1978 Act and about

SLLs under the law in effect for the years before us. In Plumb, we

reasoned that, if Congress had intended, after it became possible to

carry AMT NOLs to other years, to allow a taxpayer to make a split

election under the predecessor of section 172(b)(3) that applied to a

taxpayer’s regular tax NOL but not its AMT NOL, Congress would have

said so explicitly. Similarly, if Congress had intended, after 1978, that

an NOL that included a PLL have two carryback periods and that the

taxpayer could elect to forgo the carryback of the non-PLL portion of its

NOL without affecting the carryback of its PLL, again, Congress would

have said so.

Curiously, the majority claims support from Plumb for its position

that “a taxpayer may be entitled to multiple carryback periods.” Op. Ct.

p. 12. In Plumb, we accepted that the taxpayers had a single carryback

period for both their regular tax NOL and their AMT NOL because each

amount could be carried back three years. On the premise that “[w]hat

4 My analysis, unlike the argument the Supreme Court rejected in Lamie v.

United States Trustee, 540 U.S. 526 (2004), does not seek to create ambiguity by

comparing an existing statutory text to a predecessor. In Lamie, 540 U.S. at 530, the

existing statutory text reflected a “substantive alteration” of the predecessor statute.

By contrast, Congress has made no substantive alteration to the carryback waiver rule

since its enactment in 1976. The Lamie Court also acknowledged that it would be “fair

to doubt” that Congress would effect a significant change in the law without

announcing it. Id. at 539.

we face here is not the single carryback period present in Plumb, but

multiple carryback periods,” the majority concludes that “the reasoning

in Plumb favors” its position that an NOL can have multiple carryback

periods. Op. Ct. note 7.

The majority assumes the point in issue with its premise that, in

this case, we face “multiple carryback periods.” At most, the majority

offers grounds to distinguish Plumb. In the absence of any election in

Plumb, the taxpayers’ regular tax NOL and their AMT NOL would both

have carried back three years. In the absence of any election by Apache,

its SLLs would have carried back ten years and the rest of its NOLs

would have carried back two years. But that distinction does not

undermine the lesson I draw from Plumb: If Congress intended that

changes to other provisions would significantly affect the consequences

of an election under section 172(b)(3) or its predecessor—allowing split

elections of a type not previously allowable—it is reasonable to suppose

that Congress would have made its intention explicit. Again, Congress

did not explicitly state that its 1978 amendments to section 172 created

the possibility that a single NOL could have more than one carryback

period. Indeed, it indicated in the predecessor to section 172(f)(6) that a

taxpayer still had just one carryback for a taxable year and thus just one

carryback period for any NOL it incurred for that year. 5

Just as I am not persuaded that Plumb affirmatively supports the

proposition that, after 1978, a single NOL could have multiple carryback

periods, I am also unpersuaded by the majority’s other arguments for

that proposition.

The majority reasons that section 172(b)(1)’s mandate that

different portions of an NOL be carried to different years “strongly

suggests” that that provision “establishes distinct ‘carryback periods.’”

Op. Ct. p. 10. As the majority acknowledges, however, “the term

‘carryback period’ is not defined by the Code.” Op. Ct. p. 10. So the

majority purports to look to the term’s “ordinary meaning.” Op. Ct.

p. 10.

5 In any event, the prospect that Plumb might be distinguishable does not

mean that it supports the majority’s position. The majority’s treatment of Plumb is

one of several instances in which the majority views any authority not contrary to its

position as affirmatively supporting its position.

The term “carryback period,” however, has no ordinary meaning.

It is a specialized term in the tax law. 6 The majority conjures a

purported ordinary definition of carryback period by consulting four

dictionaries. Not surprisingly, none defines “carryback period.” The

majority’s proposed definition—“a division of time to which a loss

amount can be carried back,” Op. Ct. p. 11—does not appear in any of

the dictionaries the majority cites. But the majority does find separate

definitions of “carryback” and “period.” A “period,” Black’s Law

Dictionary tells us, is a “division of time.” Period, Black’s Law

Dictionary (6th ed. 1990). Black’s also provides a definition of

“carryback.” So does The Random House Dictionary of the English

Language. Neither of those dictionaries, however, gives us an “ordinary”

meaning of “carryback.” Each identifies the term as a tax law term. 7

And the definition each dictionary provides for “carryback” does not

accurately reflect the tax law in effect when the dictionary was

published.

Black’s defines “carryback” as “[a] provision in the tax law which

allows a taxpayer to apply a net operating loss in one year to the three

immediately preceding tax years, beginning with the earliest year.”

Carry-back, Black’s Law Dictionary (6th ed. 1990). By 1990, of course,

different portions of a single NOL could be carried back different

numbers of years. The general three-year carryback rule was not

uniform. So Black’s description of the “provision in the tax law” by

which it defines “carryback” did not accurately describe that provision.

But we can forgive Black’s—a general reference source—for its

imprecision in defining a specialized tax law term. More to the point,

Black’s definition of “carryback” refers to the application of “a net

operating loss” to offset income of prior years. It makes no reference to

loss amounts. Black’s definition of “carryback” thus supports the

proposition that a single NOL has just one carryback period.

Random House defines “carryback” as “a special provision [in U.S.

income-tax law] allowing part of a net operating loss or of an unused

credit in a given year to be apportioned over one or two preceding years.”

Carryback, The Random House Dictionary of the English Language (2d

ed. 1987). The Random House definition thus applies to net operating

6 I find it difficult to imagine passersby on the street or shoppers at market

conversing about “carryback periods.”

7 Thus, in the majority’s tautological reasoning, the tax law looks to the

“ordinary” meaning of “carryback period,” and the ordinary meaning looks to the tax

law.

losses and credits—even though separate carryback rules applied to

each. And the general carryback rule for losses in 1987 required a loss

to be carried back to the third preceding year—not just the first or

second preceding year. The Random House definition of “carryback,”

like Black’s, makes no mention of “loss amounts.” It does refer to the

apportionment of parts of a loss or credit among prior years. I take that

to refer to the ability to carry a loss or credit from earlier carryback years

to more recent years when the taxpayer’s income or tax liability for the

earlier year is not sufficient to absorb the loss or credit. The reference

to the apportionment of parts of a loss or credit among different years

does not, to my mind, establish that a net operating loss had more than

one carryback period. More generally, I would not view Random House

as a reliable source for answering that question.

Next, the majority claims that “[t]he structure of section 172—

especially section 172(f)(5) and analogous provisions” supports its

reading of section 172(b)(1) as creating separate carryback periods.

Op. Ct. p. 11. Section 172(f)(5) provides special treatment of SLLs under

section 172(b)(2). Section 172(b)(2) requires the entire amount of an

NOL to be carried to the earliest year to which the loss can be carried.

If that rule were applied without modification to a taxpayer with an

NOL that consisted in part of an SLL, the rule could be read to require

the taxpayer to carry its entire NOL back to the tenth preceding year—

the earliest of the years to which (a portion of) the loss could have been

carried under section 172(b). To foreclose that possibility, section

172(f)(5) provides that, “[f]or purposes of applying subsection (b)(2), a

specified liability loss for any taxable year shall be treated as a separate

net operating loss for such taxable year to be taken into account after

the remaining portion of the net operating loss for such taxable year.” 8

Thus, a taxpayer with an NOL that consists, in part, of an SLL first

carries the rest of its NOL back the appropriate number of years

(generally two) and then carries its SLL back ten years.

The majority reasons that “no rule similar to that of section

172(f)(5) is required for section 172(b)(3), because the latter provision,

together with section 172(b)(1), already contemplates multiple

carryback periods working in tandem.” Op. Ct. p. 12. Again, the

majority assumes the point in issue. If the different years to which

portions of a loss can be carried back under section 172(b)(1) define

8 As the majority notes, analogous rules apply when an NOL includes other

amounts subject to special carryback rules. See § 172(b)(1)(E)(iv) (regarding “eligible

loss[es]”), (h)(2) (regarding “farming losses”).

different carryback periods, then it would be unnecessary to treat those

portions of an NOL as separate NOLs for purposes of section 172(b)(3).

But it would also be unnecessary to treat different portions of an NOL

as separate NOLs for purposes of section 172(b)(3) if the NOL had just

one carryback period and Congress intended an election under section

172(b)(3) to apply to the entire NOL. In other words, the absence of a

“rule similar to that of section 172(f)(5) . . . for section 172(b)(3)” does not

favor the majority’s position over my position. That section 172(f)(5)

treats an SLL as a separate NOL only for purposes of section 172(b)(2)

and not also for purposes of section 172(b)(3) is equally compatible with

either position. It cannot be read to favor one position over the other.

Once again, the majority claims affirmative support from an authority

simply because that authority does not refute its position. By that

reasoning, I could claim that section 172(f)(5) and the analogous

provisions dealing with eligible losses and farming losses support the

position that an NOL has only one carryback period so that an election

under section 172(b)(3) necessarily relinquishes the carryback of the

taxpayer’s entire NOL.

The majority also relies on three opinions in which this Court and

two appellate courts described portions of NOLs that could be carried

back longer than the usual number of years as having their own

carryback periods. As the majority acknowledges, however, none of

those opinions “address[ed] head-on the question of whether different

carryback periods can be relinquished independently under section

172(b)(3).” Op. Ct. p. 13. Nothing turned on whether the NOLs of the

taxpayers in those cases had just one carryback period or more than one.

The majority views those opinions as “reflect[ing] the considered

judgment of those courts as to how the text of section 172 operates.”

Op. Ct. p. 13. I agree that each opinion (in its entirety) reflects the

court’s considered judgment on the issue before it (which, in each case,

involved the operation of section 172). But I doubt that the particular

statements the majority singles out reflected the court’s “considered

judgment” on whether an NOL could have more than one carryback

period. In none of the three cases was that question before the court.

As the author of Norwest Corp. v. Commissioner, 111 T.C. 105, 164

(1998), I can say that, when I wrote that “[t]he portion of the NOL of a

commercial bank that is attributable to bad debt losses is prescribed a

carryback period of 10 years,” I did not focus on the number of carryback

periods a single NOL could have. Norwest addressed how a consolidated

group of corporations computed the portion of its consolidated NOL

attributable to bad debt losses. Whether that portion of the NOL had

its own carryback period or instead extended the NOL’s single carryback

period was unimportant to the resolution of the computational issue

Norwest presented.

Finally, the majority claims that its “reading of the statute is

supported by statements that were made in connection with . . . 1997

amendments to section 172.” 9 Op. Ct. p. 13. Under the 1997

amendments, the portion of an NOL covered by the default carryback

rule could be carried back only two years instead of the previous three.

(The amendments also extended the carryforward period from 15 to 20

years.) The amendments, however, preserved the special carryback

rules that allowed portions of an NOL to be carried back further than

the default rule would allow.

The 1997 amendments had no bearing on the question of whether

an NOL could have only one carryback period or more than one.

Therefore, it is not surprising that most of the statements quoted by the

majority do not favor its multiple carryback period theory over the single

carryback period theory. For example, the House Ways and Means

Committee report states that “the bill does not apply to NOLs arising

from casualty losses of individual taxpayers.” H.R. Rep. No. 105-148,

at 499 (1997), as reprinted in 1997 U.S.C.C.A.N. 678, 893. The report of

the Senate Finance Committee includes the same statement. S. Rep.

No. 105-33, at 184 (1997), reprinted in 1997-4 C.B. (Vol. 2) 1067, 1264.

The Conference Report describes the Senate amendment, which the

conference agreement followed, as “preserv[ing] the 3-year carryback for

NOLs of farmers and small businesses attributable to losses incurred in

Presidentially declared disaster areas.” H.R. Rep. No. 105-220, at 585

(1997) (Conf. Rep.), reprinted in 1997-4 C.B. (Vol. 2) 1467, 2055. And

the General Explanation prepared by the Staff of the Joint Committee

on Taxation states: “The Act does not apply to the carryback rules

relating to REITs, specified liability losses, excess interest losses, and

corporate capital losses.” Staff of J. Comm. on Tax’n, 105th Cong.,

General Explanation of Tax Legislation Enacted in 1997 (1997

Bluebook), JCS-23-97, at 268 (J. Comm. Print 1997). I fail to see how

those statements “support[]” the majority’s “reading of the statute.”

That the 1997 amendments did not affect the carryback of amounts

subject to special rules does not establish that those amounts had their

own carryback periods.

9 Curiously, while claiming “support[]” from the 1997 legislative history, the

majority simultaneously suggests that it addresses the legislative history only as an

accommodation “[f]or those who consider legislative history relevant.” Op. Ct. p. 13.

The only statement the majority quotes that could support its

reading of the statute is one by the Senate Finance Committee. The

Committee expressed the belief that “a two-year carryback of NOLs

[would be] sufficient to account for [natural] business cycles.” S. Rep.

No. 105-33, at 184, 1997-4 C.B. (Vol. 2) at 1264. In support of that belief,

the committee noted that “many deductions allowed for tax purposes

relate to future, rather than past, income streams and . . . certain

deductions that do not relate to past income streams are granted special,

longer carryback periods under present law (which are retained by the

bill).” Id. (emphasis added). I view the committee’s reference to “special,

longer carryback periods” as akin to the dicta in the three cases the

majority cites. The point the committee was making was that SLLs and

similar amounts could continue to be carried back longer than the

default rule would allow. Whether the additional years to which those

amounts could be carried back defined separate “carryback periods” was

not central to the committee’s justification for the amendments. 10

To review, the majority’s position that an NOL can have multiple

carryback periods if portions of that NOL can be carried back to different

taxable years rests on (1) a purported “ordinary” meaning of “carryback

period” not found in the sources on which the majority relies,

(2) provisions of section 172 (that is, section 172(f)(5) and the analogous

provisions for eligible losses and farming losses) that do not favor the

majority’s multiple carryback period theory over the alternative

proposition that a single NOL has only one carryback period, (3) dicta

from prior opinions of this Court and two appellate courts, and (4) a

statement in a 1997 report by the Senate Finance Committee that

should be viewed as akin to dicta.

On the other side of ledger, in support of the proposition that a

single NOL continued to have just one carryback period even after it

became possible for different portions of that NOL to be carried back to

different years, we have (1) the clear implication of section 172(f)(6) and

its predecessor, which the majority summarily dismisses, 11 and (2) the

10 For similar reasons, I would not read much into the statement, included in

each of the sources cited by the majority, that “[a] taxpayer may elect to forgo the

carryback of an NOL” (rather than all or part of an NOL). H.R. Rep. No. 105-148,

at 498, 1997 U.S.C.C.A.N. at 892 (emphasis added); S. Rep. No. 105-33, at 183, 1997-4

C.B. (Vol. 2) at 1263; H.R. Rep. No. 105-220, at 584, 1997-4 C.B. (Vol. 2) at 2054; 1997

Bluebook, at 267.

11 After accusing me of “misread[ing] section 172(f)(6),” the majority opines:

“[W]hatever inference might arise from the text of section 172(f)(6) does not suffice to

absence of any indication that the carryback waiver rule now provided

in section 172(b)(3), which necessarily started out as an all-or-nothing

rule, has not remained all-or-nothing, requiring the waiver of the

carryback of the electing taxpayer’s entire NOL. In my judgment, the

balance tips decidedly in favor of the proposition that an NOL has only

one carryback period so that a valid election under section 172(b)(3)

necessarily relinquishes the carryback of the electing taxpayer’s entire

NOL.

II.

Even if, After 1978, an NOL Could Have Multiple Carryback

Periods, a Section 172(b)(3) Election Relinquishes the Carryback

of the NOL in its Entirety.

Even if I were to accept that, after 1978, a single NOL could have

multiple carryback periods, I would still read the carryback waiver rule

to require the relinquishment of any and all carryback periods to which

the electing taxpayer might be entitled. The possibility of multiple

carryback periods would allow us to interpret the singular noun

“carryback period,” as used in section 172(b)(3), to refer to more than

one carryback period. 1 U.S.C. § 1. In that case, we would read the

statute to say that any taxpayer entitled to a carryback period (or

periods) under section 172(b)(1) can elect to relinquish the carryback

period (or periods). What carryback period (or periods) can the taxpayer

elect to relinquish? The use of the definite article tells us that the period

(or periods) referred to are those previously referred to—that is, the

carryback period (or periods) to which the electing taxpayer is entitled.

See Nielsen v. Preap, 586 U.S. 392, 408 (2019) (“[G]rammer and usage

establish that ‘the’ is ‘a function word . . . indicat[ing] that a following

noun or noun equivalent is definite or has been previously specified by

context.” (quoting The, Merriam-Webster’s Collegiate Dictionary

(11th ed. 2005))). Therefore, even if I were to accept that an NOL can

have more than one carryback period, I would still interpret section

172(b)(3) as allowing an election to relinquish any and all carryback

periods to which the electing taxpayer is entitled. 12

overcome the . . . textual indicators” that the majority views as supporting its position.

Op. Ct. p. 20.

12 The phrase “the . . . carryback period,” as used in the second part of the

operative sentence in section 172(b)(3), cannot be read to refer to whatever period or

periods an electing taxpayer chooses to relinquish because those periods are not known

until a taxpayer makes an election.

The majority claims that, if section 172(b)(1) establishes different

carryback periods, it would “make[] little sense” to “[r]ead[] section

172(b)(3) as providing a taxpayer with an all or nothing election,”

particularly because Congress went “out of its way to give taxpayers

additional choices” by allowing the elections provided in section 172(f)(6)

and the analogous provisions for eligible losses and farming losses.

Op. Ct. p. 15. Again, I am unpersuaded. Even if the different years to

which portions of an NOL can be carried under section 172(b)(1)

establish different carryback periods, it does not follow that those

periods can be waived separately rather than collectively. The existence

of multiple items in a group does not establish that differential, rather

than uniform, treatment of those items should be allowed. And

Congress’s grant of some flexibility in the treatment of different portions

of an NOL does not establish that Congress intended to allow the degree

of flexibility Apache seeks.

The majority sees no “policy reason” to “tie the hands of taxpayers

[with] multiple carryback periods under section 172(b)(1).” Op. Ct. p. 17.

As the majority notes, Congress’s enactment of the carryback waiver

rule in 1976 showed that it was sympathetic to taxpayers whose loss

carrybacks would have displaced other tax attributes that, if carried

forward, might expire sooner. See generally Staff of J. Comm. on Tax’n,

94th Cong., General Explanation of the Tax Reform Act of 1976, JCS33-76, at 189 (J. Comm. Print 1976). But an election to forgo the

carryback altogether would preserve the tax attributes that would

otherwise have been displaced. An all-or-nothing election would not be

a “stingy . . . solution” to the problem Congress addressed in 1976.

Op. Ct. pp. 17–18. The relevant policy question is whether a taxpayer

with an NOL that includes an SLL should be able to have its cake and

eat it, too, by carrying its SLL back ten years while forgoing the

carryback of the rest of its NOL and thereby avoiding the displacement

of other tax attributes generated in the more recent years. I agree that

there may be no compelling reason to require the taxpayer to give up the

carryback of its SLL as the price of preserving the tax attributes that

would be displaced by the carryback of the rest of the taxpayer’s NOL.

But I am also unaware of a strong policy reason to allow selective

carryback waivers. The stated reason for the carryback waiver in the

first place would be achieved by either a selective or an all-or-nothing

waiver election.

As the majority notes, Treasury Regulation § 1.172-13(c)(4)

allowed a taxpayer with a PLL to elect to relinquish the carryback of the

rest of its NOL while still carrying its PLL back ten years. The majority

asserts that, if Apache’s SLL had consisted of deductions described in

section 172(f)(1)(A) (related to product liability), “the Commissioner

would be bound [by Treasury Regulation § 1.172-13] to permit Apache’s

carryback.” Op. Ct. p. 17. But the majority seems to accept that,

because Apache’s SLL consists entirely of deductions described in

section 172(f)(1)(B) (not related to product liability), the regulation does

not bind the Commissioner to accept Apache’s election.

Therefore, it is not clear to me what point the majority seeks to

make in regard to the regulation. The majority writes that “there is no

meaningful principle by which to justify treating product liability losses

under section 172(f)(1)(A) differently, for purposes of the carryback

period election, from other specified liability losses under section

172(f)(1)(B).” Op. Ct. p. 17. That may be true. Even so, the majority

seems to accept that, while the regulation (in its view) would bind the

Commissioner in regard to SLLs consisting of product liability

deductions described in section 172(f)(1)(A), it does not bind the

Commissioner in regard to SLLs, such as Apache’s, consisting of

deductions described in section 172(f)(1)(B) that are unrelated to

product liability. Certainly, we are not bound to adopt the interpretation

of section 172 reflected in Treasury Regulation § 1.172-13. As the

Supreme Court has recently instructed us, we must exercise our own

“independent judgment” in interpreting statutes. Loper Bright Enters.

v. Raimondo, 144 S. Ct. 2244, 2273 (2024).

Therefore, even if I were to accept that a single NOL could have

multiple carryback periods, I would remain unpersuaded by the

majority’s arguments that a taxpayer can elect under section 172(b)(3)

to relinquish some carryback periods and not others. Instead, giving the

definite article its normal meaning, I would read section 172(b)(3) to

allow a taxpayer entitled to a carryback period (or periods) to elect to

relinquish the carryback period (or periods) to which the taxpayer is

entitled.

Whether or not a single NOL, after 1978, could have multiple

carryback periods, Apache, in attempting to preserve the ten-year

carryback of its SLL while relinquishing the two-year carryback of the

rest of its NOL, sought to make an election that the law does not allow.

Apache’s election was thus invalid. Apache should be allowed to carry

its SLLs back ten years but should also be required to carry the rest of

its NOLs back two years. Both the Commissioner’s and Apache’s

Motions should be denied.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.