SECTION 1. PURPOSE

.01 This revenue procedure modifies one of the terms and conditions under which the Internal Revenue Service grants approval of requests for changes in annual accounting periods filed under Rev. Proc. 2002– 37, 2002–22 I.R.B. 1030, and Rev. Proc. 2002–39, 2002–22 I.R.B. 1046. Specifically, this revenue procedure modifies the term and condition pursuant to which taxpayers generally are prohibited from carrying back net operating losses (NOLs) and capital losses (CLs) generated in the short period necessary to effect the change. See section 6.08 of Rev. Proc. 2002–37, and section 5.04(6) of Rev. Proc. 2002–39.

.02 The Modified Carryback Term and Condition of section 4.01 of this revenue procedure generally applies, in the case of taxpayers within the scope of Rev. Proc. 2002–37, to taxable years ending on or after April 8, 2003, and, in the case of certain taxpayers within the scope of Rev. Proc. 2002–39, to applications filed on or after that date. In addition, section 5 of this revenue procedure allows certain qualifying taxpayers that previously changed their annual accounting period (either automatically or with prior approval) to elect to apply either (1) the Modified Carryback Term and Condition, under which the loss is carried back to the applicable number of years prescribed by § 172 or 1212 of the Internal Revenue Code as it would have applied to the short period; or (2) in the case of taxpayers with certain NOLs arising in short periods ending during 2001 or 2002, an Alternative Carryback Term and Condition under which the NOL is carried back to each of the 2 taxable years preceding the short period.

2003–18 I.R.B. 856 May 5, 2003

ing a timely election to waive the entire carryback period under § 172(b)(3), or have in place an election under § 1502– 21(b)(3)(ii)(B).