UNITED STATES TAX COURT

CLC

135 T.C. No.

28

UNITED STATES TAX COURT

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 ATNOU that offsets~all of P's AMTI.

Neil D. Kimmelfield, Lewis M. Horowitz, and John H. Gadon,

for petitioner.

John D. Davis, for respondent.

SERVED Dec 15 2010

- 2 OPINION

PARIS, Judge:

Petitioner petitioned the Court to

redetermine 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

alternative tax net operating loss (ATNOL) that offsets all of

petitioner's alternative minimum taxable income (AMTI).1

Our

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 ·therewith.

We

incorporate those stipulations herein by this reference.

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

without regard to the ATNOLD,

is $37,540,893.

For 2003

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.

- 3 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).

petitioner incurred an ATNOL of $29,427,241

For 2004,

(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

$3,150,793).

(a reduction of

The $3,150,793 reduction, in turn, created the

deficiency in petitioner's tax (specifically, its alternative

minimum 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).

- 4 -

Discussion

I. AMT

Section 55(a) imposes an AMT for a taxable year where the

tentative minimum tax exceeds the regular tax.

Commissioner, 118 T.C. 1, 5 (2002).

See also Allen v.

A corporate taxpayer'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."

55(b) (1) (]B).

Sec.

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

operating loss deduction" for purposes of section 56(a) (4).

enacted by the Tax Reform Act of 1986,

Pub. L.

99-514,

As

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 "alternative tax net operating loss

deduction" means the net operating loss deduction

allowable for the taxable year under section 172,

except that--

- 5 -

(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)

"Energy Preferences").

(providing an adjustment relating to

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:

SEC. 56(d). Alternative Tax Net Operating Loss

Deduction Defined.-(1) In general.--For purposes of subsection

(a) (4), the term "alternative tax net operating loss

deduction't 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

subsection (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,

- 6 -

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.

sec. 102(c) (2), 116 Stat. 26.

See id.

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 "alternative 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 determined

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

- 7 carrvforwards 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 Act section 102.

Conf. Rept.

108-696, at 90

(2004).

H.

The 2004 Act replaced the

word "carryforwards" in section 56(d) (1) (A) (ii) (I) with the word

"carryovers", amended section 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

effective date provision set forth in 2002 Act section 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.

sec. 403(f),

118 Stat. 1188.

See id.

Following these amendments, 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 "alternative 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--

- 8 (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 determined

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 nët operating losses to

taxable years ending during 2001 and

2002 * * *

[Emphasis added.23

III.

Computation of ATNOLD

We interpret a statute by looking -first to its text.

Williams v. Taylor,

529 U.S. 420, 431

Ron Pair Enters.,

489 U.S.

Inc.,

See

(2000); United States v.

235, 241

(1989).

The plain

meaning of the text is generally conclusive if the text is clear

and fits the case.

(1990)

See Sullivan v. Stroop, 496 U.S. 478, 482

("'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 Mart

2This 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.

- 9 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."

Bank v. Germain, 503 U.S. 249, 253-254

Conn. Natl.

(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 regular

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

- 10 -

determining an ATNOLD.

632, 638 (1991)

See also Plumb v. Commissioner, 97 T.C.

(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 section 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

"carryover" 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.

approach is mistaken.

Petitioner's

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 section 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

- 11 -

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.

disagree.

We

The House and Senate confere.es described the changes

made to section 56(d) (1) (A) by the 2004 Act as "clerical".

Conf. Rept. 108-696, supra at 90.

Committee on Taxation did likewise.

H.

The Staff of the Joint

See Staff of Joint Comm. on

Taxation, Description of the "Tax Te.chnical 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

- 12 -

language 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 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 alteratio.h 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 taxable years

- 13 -

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"

Print 2003).

position.

(JCX-40-03), at 19-20

(J. Comm.

This proposal is consistent with petitioner's

Congress, however, chose not to enact this option.

That Congress apparently 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 contrary

holding and, to the extent not discussed above, find those

arguments to be without merit.

In the light of the parties'

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.