SECTION 12. FINANCIAL

STATEMENT NET OPERATING LOSSES.

.01 Purpose . The Treasury Department and the IRS intend to propose rules in forthcoming proposed regulations consistent with the interim guidance provided in this section 12, which provides corporations with additional clarity in determining use of FSNOL carryovers prior to forthcoming proposed regulations.

.02 FSNOL carryover . The amount of an FSNOL described in § 56A(d)(3) carried forward to the first taxable year a corporation is an Applicable Corporation (and subsequent taxable years) is determined under § 56A(d)(2) without regard to whether the Taxpayer was an Applicable Corporation for any prior taxable year.

.03 Example . The following example illustrates the rule set forth in section 12.02 of this notice. (1) Facts . X is a calendar year Taxpayer. For taxable year 2020, X generated an FSNOL of $3 billion.

For taxable years 2021, 2022, and 2023, X’s AFSI (without taking into account the adjustment under § 56A(d)(1)) was $900 million, $1.1 billion, and $1.2 billion, respectively. X first becomes an Applicable Corporation in taxable year 2024.

(2) Analysis . X will calculate its FSNOL carryover to taxable year 2024 by first determining how much of the 2020 FSNOL is absorbed in taxable years 2021 through 2023. In taxable year 2021, $720 million (80% of $900 million) of the FSNOL carryover is absorbed, resulting in an FSNOL carryover to taxable year 2022 of $2.280 billion ($3 billion - $720 million). In taxable year 2022, $880 million (80% of $1.1 billion) of the FSNOL carryover is absorbed, resulting in an FSNOL carryover to taxable year 2023 of $1.4 billion ($2.280 billion - $880 million). In taxable year 2023, $960 million (80% of $1.2 billion) of the FSNOL carryover is absorbed resulting in an FSNOL carryover to taxable year 2024 of $440 million ($1.4 billion - $960 million).