Caroline L. Harris
Former Vice President, Tax Policy & Economic Development, Former Chief Tax Policy Counsel


May 16, 2020


Recently a story was published in Bloomberg (and repeated by Politico) about the use of net operating loss (NOL) tax relief in the recent CARES Act, criticizing these provisions as being a “stealth bailout for the oil and gas industry.” In order to properly evaluate that accusation, more context is needed to help understand how frequently NOL relief has been used in response to economic crises.

NOL relief was included in the CARES Act because it provides much needed liquidity to a broad swath of the business community—not just the oil and gas industry. As the U.S. economy began to shut down in response to the pandemic, thousands of businesses saw their revenue plummet; without revenue, it is tough to pay employees or even utility bills. NOL relief is a tried and true nonpartisan provision for all businesses that long has been employed in response to disasters, such as 9/11, Hurricane Katrina, and the financial crisis.

Further, because NOL relief has been used many times before, it is relief that the IRS can quickly implement to issue tax refunds to businesses, allowing them to remain operational and maintain payrolls. And let’s be clear, timeliness matters a lot if we want to preserve jobs and be prepared to restart the economy quickly when it is safe to do so.

When included in the Worker, Homeownership and Business Assistance Act of 2009 in response to the economic recession, then Senate Finance Committee Chairman Max Baucus (D-MT) stated, “The NOL carryback provision will benefit businesses both large and small by allowing them to offset their losses so they can continue to maintain and create jobs and fight through this recession.”

Speaker Pelosi also made sure to praise this vital provision, stating on the floor:

The bill also has the net operating loss carryback provisions, which businesses tell us is necessary for them to succeed and to hire new people and also to mitigate for some of the damage that has been done to the economy from past policies. Taking action now to turn around our economy is our most urgent and pressing challenge. It must be our top priority, regardless of party. And that is why I am so pleased that we're going to have such a strong bipartisan vote.

This smart and timely relief was actually an expansion of relief in the 2009 American Recovery and Reinvestment Act, which had limited NOL relief to small businesses. Howard Gleckman, with the Tax Policy Center, noted that when that relief was limited to small businesses in earlier legislation, “the conferees emasculated the proposal” with this limitation. He concluded, “The NOL carryback was among the best of the business tax breaks Congress considered in the stimulus debate. It ought to keep it.”

The reality is that NOL relief is one of the best ways to allow employers across all industries and sectors to quickly tap tax refunds for desperately needed liquidity. If employers don’t have revenue they cannot pay their employees or provide benefits that are so necessary during this crisis. While that is true for oil companies, NOL relief is not a “bailout” for a specific industry – it’s a tax provision long lauded by both sides of the aisle because of its proven stimulus impacts, and its utilization now should not be subject to attacks on certain industries.

About the authors

Caroline L. Harris

Caroline Harris is former vice president, tax policy and economic development, and chief tax policy counsel at the U.S. Chamber of Commerce.