Section 172(b)(3) Election to Waive NOL Carryback Period

The Section 172(b)(3) election to waive the NOL carryback is a written statement you attach to your timely filed tax return for the loss year, declaring that you give up the carryback period entirely and send the whole net operating loss forward instead. It applies to the two groups who still have a carryback under current law: farmers with a farming loss and non-life insurance companies. Once made, it cannot be undone.¹

Whether You Have a Carryback to Waive in the First Place

The election only does something if the default rule would have carried your loss back. For NOLs arising in tax years after 2020, the general carryback is gone. Sole proprietors, partnerships, S corporations, and most C corporations carry losses forward automatically, with no election needed and nothing to waive.²

Two categories still have a carryback:

Farmers with a farming loss get a two-year carryback under Section 172(b)(1)(B). Only the farming loss portion carries back; the rest of any NOL carries forward on its own.¹
Non-life insurance companies (property and casualty insurers) keep a two-year carryback and a twenty-year carryforward under Section 172(b)(1)(C).¹

If neither describes you, there is no carryback to waive and no statement to file. If one does, read on.

What the Election Statement Has to Say

The IRS doesn’t provide a form for this. You write the statement yourself and attach it to the return. The IRS instructions for Form 172 require that the statement clearly show you are choosing to waive the carryback period under Section 172(b).²

Include three things:

Your full legal name and taxpayer identification number (SSN for individuals, EIN for corporations).
The specific tax year in which the NOL arose. The election is tied to one year’s loss and doesn’t carry over to future losses.
A clear sentence declaring the election. Something like: “Pursuant to IRC Section 172(b)(3), [Taxpayer Name], EIN [XX-XXXXXXX], elects to waive the entire carryback period for the net operating loss arising in tax year [year].”

Plain and direct is enough. The IRS is not looking for legal flourishes.

Where and When to File It

Attach the statement to the original income tax return for the loss year. A farmer files it with Form 1040; a corporate filer attaches it to Form 1120; a non-life insurance company attaches it to its return for the loss year.²

The deadline is the due date of that return, including any valid extension. A calendar-year farmer with a 2025 farming loss would need to attach the statement by April 15, 2026, or by October 15, 2026, with a timely extension. Miss that deadline and the default carryback takes over automatically.¹

Don’t confuse the election with Form 1045 or Form 1139. Those are used to claim a quick tentative refund when you actually carry a loss back — the opposite of what the election does.³ To waive the carryback, you file no 1045 or 1139. You just attach the written statement to your regular return.

If You Filed On Time But Forgot the Statement

There’s a limited fix. You can make the election on an amended return filed within six months of the original due date of the return, not counting extensions. Write “Filed pursuant to section 301.9100-2” at the top of the election statement attached to the amended return.²

This works only if the original return itself was timely filed. If the return was late, this six-month window is closed to you.

If You Missed That Window Too

The only remaining route is a private letter ruling under Treasury Regulation Section 301.9100-3. It’s slow and expensive. The IRS user fee depends on your gross income: $3,450 for taxpayers with gross income under $400,000, $9,775 for gross income between $400,000 and $10 million, and $14,500 for gross income above $10 million.⁴ There is no guarantee the IRS will grant relief, and processing typically takes months. For most taxpayers, the ruling cost will exceed the tax benefit of the election.

The Election Is Irrevocable and Covers the Whole Loss

Once properly filed for a given tax year, the election cannot be undone. The statute says so directly.¹ If you later find out the carryback years had higher marginal rates than you assumed, or your projected future income doesn’t arrive, you cannot switch back.

The waiver also applies to the entire NOL for that year. You cannot waive part of the loss and carry the rest back. And each loss year stands on its own: waiving the carryback on a 2025 farming loss says nothing about a 2026 farming loss. You decide fresh each time.

When Waiving the Carryback Makes Sense

The election is a bet that future tax years will be more valuable to offset than past ones. It tends to pay off in a few situations:

The two carryback years produced little tax liability, so a carryback refund would be small. A growing farming operation may expect much larger taxable income ahead, making the carryforward worth more per dollar of NOL.
You expect higher marginal rates in coming years, whether from business growth, scheduled rate changes, or lost deductions. NOL dollars offset more tax when applied against higher-rate income.
You want to avoid the paperwork and wait time of amended returns or a tentative refund application, and would rather reduce future estimated tax payments instead.
For non-life insurance companies, the interaction between an NOL carryback and other provisions in the carryback years can be messy. A clean carryforward can be simpler.

Against that, a carryback refund puts cash in your pocket now, and a business that just posted a loss usually values cash now. Projecting future income confidently is hard in farming, where weather, commodity prices, and input costs move sharply. If the carryback years had solid taxable income, taking the refund is often the better call.

State Rules Don’t Follow Automatically

Federal and state NOL rules don’t always match. Some states don’t conform to the federal carryback or carryforward provisions at all, some cap carryforward periods at twenty years, some have no carryback regardless of federal law, and a few require their own separate state-level election to waive a state carryback. Making the Section 172(b)(3) election on your federal return does not waive any state carryback you might have. Check your state’s rules on their own terms.

1
Office of the Law Revision Counsel. 26 U.S. Code 172 – Net Operating Loss Deduction
2
Internal Revenue Service. Instructions for Form 172
3
Internal Revenue Service. About Form 1045, Application for Tentative Refund
4
Internal Revenue Service. Internal Revenue Bulletin: 2025-1