Page:United States Statutes at Large Volume 92 Part 3.djvu/227

 PUBLIC LAW 95-600—NOV. 6, 1978

92 STAT. 2859

SEC. 371. NET OPERATING LOSSES ATTRIBUTABLE TO PRODUCT LIABILITY LOSSES. (a) 10-YEAR CARRYBACK.—

(1) IN GENERAL.—Paragraph (1) of section 172(b) (relating to 26 USC 172. years to which loss may be carried) is amended by adding at the end thereof the following new subparagraph: "(H) PRODUCT LIABILITY LOSSES.—In the case of a taxpayer which has a product liability loss (as defined in subsection (i)) for a taxable year beginning after September 30, 1979 (referred to in this subparagraph as the 'loss year'), the product liability loss shall be a net operating loss carryback to each of the 10 taxable years preceding the loss year." (2) CONFORMING AMENDMENT.—Clause (i) of section 172(b)(1)(A)

is amended by striking out "and (G)" and inserting in lieu thereof "(G), and (H)". (b) RULES RELATING TO PRODUCT LIABILITY LOSSES.—Section 172 is

amended by redesignating subsection (i) as subsection (j) and by inserting after subsection (h) the following new subsection: "(i) RULES RELATING TO PRODUCT LIABILITY LOSSES.—For purposes

of subsection (b)— "(1) PRODUCT LIABILITY LOSS.—The term 'product liability loss' means, for any taxable year, the lesser of— "(A) the net operating loss for such year reduced by any portion thereof which is attributable to a foreign expropriation loss, or "(B) the sum of the amounts allowable as deductions under sections 162 and 165 which are attributable to— 26 USC 162, "(i) product liability, or 165. "(ii) expenses incurred in the investigation or settlei' ment of, or opposition to, claims against the taxpayer on t account of product liability. "(2) PRODUCT LIABILITY.—The term 'product liability' means— "(A) liability of the taxpayer for damages on account of physical injury or emotional harm to individuals, or damage to or loss of the use of property, on account of any defect in any product which is manufactured, leased, or sold by the taxpayer, but only if "(B) such injury, harm, or damage arises after the taxpayer has completed or terminated operations with respect to, and has relinquished possession of, such product. "(3) ELECTION.—Any taxpayer entitled to a 10-year carryback ,. under subsection (b)(l)(H) from any loss year may elect to have the carryback period with respect to such loss year determined without regard to subsection (b)(1)(H). Such election shall be made in such manner as may be prescribed by the Secretary and shall be made by the due date (including extensions of time) for filing the taxpayer's return for the taxable year of the net operating loss. Such election, once made for any taxable year, shall be irrevocable for that taxable year." (c) APPLICATION OF ACCUMULATED EARNINGS TAX TO PRODUCT LIABILITY LOSS RESERVES.—Subsection (h) of section 537 (relating to

26 USC 537.

special rules) is amended by redesignating paragraph (4) as paragraph (5) and by inserting after paragraph (3) the following new paragraph: "(4) PRODUCT LIABIIJTY LOSS RESERVES.—The accumulation of reasonable amounts for the payment of reasonably anticipated product liability losses (as defined in section 172(i)), as deter- Supra.

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