Hotel chain entitled to $22 million in specified loss carrybacks.

• Author: Weinberger, Mark

A district court in Maryland has ruled that Host Marriott Corporation is entitled to specified liability loss carrybacks for workers' compensation payments and Federal income tax deficiency interest, resulting in a $22 million tax reduction. The district court granted summary judgment in the taxpayer's favor in Host Marriott Corp., 113 F Supp2d 790 (DC Md 2000).

The loss carryback issue has been a contentious one in recent years, with the Service consistently denying attempts by taxpayers to claim the Sec. 172(f) 10-year carryback. Host Marriott reported a net operating loss (NOL) of over $139 million, including $60 million in specified liability losses, for its 1991 tax year. The specified liability losses were $7 million in workers' compensation payments (from injuries sustained prior to Host Marriott's 1988 tax year) and $46 million in Federal income tax deficiency interest (from returns for fiscal years 1977-1979).

Host Marriott argued it was entitled under Sec. 172(f) to carry back both types of losses to its 1984 and 1985 tax years, resulting in a reduction in its tax liability of over $22 million. The Service disagreed, limiting the availability of loss carrybacks to include only those with an element of inherent delay.

The district court rejected the IRS's interpretation...