                                             METRO ONE TELECOMMUNICATIONS, INC., PETITIONER
                                                 v. COMMISSIONER OF INTERNAL REVENUE,
                                                              RESPONDENT
                                                        Docket No. 12651–07.                Filed December 15, 2010.

                                                 P claimed an alternative tax net operating loss (ATNOL)
                                               deduction for 2002. P calculated the deduction by taking into
                                               account a carryback of an ATNOL from 2004. The deduction
                                               of the carryback reduced P’s alternative minimum taxable
                                               income (AMTI) to zero. Held: P’s carryback of the ATNOL is
                                               not a ‘‘carryover’’ under sec. 56(d)(1)(A)(ii)(I), I.R.C.; thus, sec.
                                               56(d)(1)(A)(i)(II), I.R.C., precludes P from deducting an
                                               ATNOL that offsets all of P’s AMTI.

                                       Neil D. Kimmelfield, Lewis M. Horowitz, and John H.
                                      Gadon, for petitioner.
                                       John D. Davis, for respondent.

                                                                                   OPINION

                                         PARIS, Judge: Petitioner petitioned the Court to redeter-
                                      mine respondent’s determination of a $630,159 deficiency in
                                      its 2002 Federal income tax. We decide whether section
                                      56(d)(1)(A)(i)(II) precludes petitioner from deducting an alter-
                                      native tax net operating loss (ATNOL) that offsets all of peti-
                                      tioner’s alternative minimum taxable income (AMTI). 1 Our
                                        1 Unless otherwise indicated, section references are to the applicable versions of the Internal

                                      Revenue Code of 1986. Rule references are to the Tax Court Rules of Practice and Procedure.


                                                                                                                                     573




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                                      574                135 UNITED STATES TAX COURT REPORTS                                        (573)


                                      decision turns on whether petitioner’s carryback of an ATNOL
                                      from 2004 is a ‘‘carryover’’ within the meaning of section
                                      56(d)(1)(A)(ii)(I). We agree with respondent that the
                                      carryback is not such a ‘‘carryover’’ and that petitioner’s
                                      ATNOL     deduction (ATNOLD) is limited by section
                                      56(d)(1)(A)(i)(II).

                                                                               Background
                                        This case was submitted to the Court fully stipulated
                                      under Rule 122. Our recitations of fact are based upon the
                                      parties’ stipulations of fact and the exhibits submitted there-
                                      with. We incorporate those stipulations herein by this ref-
                                      erence. Petitioner is an Oregon corporation, and its principal
                                      place of business was in Oregon when its petition was filed.
                                        Petitioner’s AMTI for 2002 (2002 AMTI), as determined with-
                                      out regard to the ATNOLD, is $37,540,893. For 2003 petitioner
                                      incurred an ATNOL of $37,670,950 (2003 ATNOL). Petitioner
                                      deducted $15,066,158 of the 2003 ATNOL as a carryback to
                                      2001 and deducted the remaining $22,604,792 as a carryback
                                      to 2002. Petitioner also deducted for 2002 $603,295 of ATNOLs
                                      carried over from taxable years before 2001.
                                        Petitioner’s 2002 AMTI was $14,332,806 after petitioner
                                      deducted the $603,295 in carryovers and the $22,604,792
                                      carryback ($37,540,893 – $603,295 – $22,604,792 =
                                      $14,332,806). For 2004, petitioner incurred an ATNOL
                                      of $29,427,241 (2004 ATNOL). Petitioner then claimed a
                                      $14,332,806 deduction for 2002 on account of a carryback of
                                      a like amount of the 2004 ATNOL, resulting in an ATNOLD for
                                      2002 that offset all of petitioner’s AMTI for that year.
                                      Respondent, in the notice of deficiency, determined for 2002
                                      that the 90-percent limitation of section 56(d)(1)(A)(i)(II)
                                      applied to petitioner’s ATNOLD and reduced the amount of the
                                      carryback from 2004 to $11,182,013 (a reduction of
                                      $3,150,793). The $3,150,793 reduction, in turn, created the
                                      deficiency in petitioner’s tax (specifically, its alternative min-
                                      imum tax (AMT)) for 2002. See sec. 55(b)(1)(B) (imposing a
                                      tax rate of 20 percent, which when applied to the $3,150,793
                                      increase in petitioner’s 2002 AMTI results in the $630,159
                                      deficiency at issue).




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                                      (573)        METRO ONE TELECOMMS., INC. v. COMMISSIONER                                       575


                                                                                Discussion
                                      I. AMT
                                        Section 55(a) imposes an AMT for a taxable year where the
                                      tentative minimum tax exceeds the regular tax. See also
                                      Allen v. Commissioner, 118 T.C. 1, 5 (2002). A corporate tax-
                                      payer’s tentative minimum tax is ‘‘(i) 20 percent of so much
                                      of the alternative minimum taxable income for the taxable
                                      year as exceeds the exemption amount, reduced by (ii) the
                                      alternative minimum tax foreign tax credit for the taxable
                                      year.’’ Sec. 55(b)(1)(B). A corporate taxpayer’s AMTI equals its
                                      taxable income as adjusted for certain items. See sec.
                                      55(b)(2). One of those items, specified in section 56(a)(4),
                                      allows a corporate taxpayer to claim an ATNOLD in lieu of a
                                      net operating loss (NOL) deduction allowed under section 172.
                                      II. Section 56(d)(1)
                                        Section 56(d)(1) defines the term ‘‘alternative tax net oper-
                                      ating loss deduction’’ for purposes of section 56(a)(4). As
                                      enacted by the Tax Reform Act of 1986, Pub. L. 99–514, sec.
                                      701(a), 100 Stat. 2320, section 56(d)(1) provided in relevant
                                      part:
                                       SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
                                      DEFINED.—
                                         (1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
                                       native tax net operating loss deduction’’ means the net operating loss
                                       deduction allowable for the taxable year under section 172, except that—
                                           (A) the amount of such deduction shall not exceed 90 percent of
                                         alternate minimum taxable income determined without regard to such
                                         deduction * * *

                                      This version of section 56(d)(1) was later amended three
                                      times to arrive at the version applicable here.
                                        First, the Omnibus Budget Reconciliation Act of 1990
                                      (1990 Act), Pub. L. 101–508, sec. 11531(b)(1), 104 Stat. 1388–
                                      490, amended section 56(d)(1)(A) to conform to the 1990 Act’s
                                      enactment of section 56(h) (providing an adjustment relating
                                      to ‘‘Energy Preferences’’). Following this amendment, which
                                      was effective for taxable years beginning after December 31,
                                      1990, see 1990 Act sec. 11531(c), 104 Stat. 1388–490, section
                                      56(d)(1) provided in relevant part:




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                                      576                135 UNITED STATES TAX COURT REPORTS                                        (573)


                                       SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
                                      DEFINED.—
                                         (1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
                                       native tax net operating loss deduction’’ means the net operating loss
                                       deduction allowable for the taxable year under section 172, except that—
                                           (A) the amount of such deduction shall not exceed the excess (if any)
                                         of—
                                              (i) 90 percent of alternative minimum taxable income determined
                                           without regard to such deduction and the deduction under sub-
                                           section (h), over
                                              (ii) the deduction under subsection (h), * * *

                                         Second, the Job Creation and Worker Assistance Act of
                                      2002 (2002 Act), Pub. L. 107–147, sec. 102(c)(1), 116 Stat. 26,
                                      amended section 56(d)(1)(A) to let ‘‘carrybacks’’ of ATNOLs
                                      from 2001 and 2002 offset AMTI of previous years without
                                      regard to the 90-percent limitation. The 2002 Act also
                                      amended section 56(d)(1)(A) to let ‘‘carryforwards’’ of ATNOLs
                                      from years before 2001 offset AMTI for 2001 and 2002 without
                                      regard to the 90-percent limitation. See id. The amendments
                                      in the 2002 Act affected taxable years ending before January
                                      1, 2003. See id. sec. 102(c)(2), 116 Stat. 26. Following those
                                      amendments, section 56(d)(1) provided in pertinent part as
                                      follows:
                                       SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
                                      DEFINED.—
                                         (1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
                                       native tax net operating loss deduction’’ means the net operating loss
                                       deduction allowable for the taxable year under section 172, except that—
                                           (A) the amount of such deduction shall not exceed the sum of—
                                              (i) the lesser of—
                                                 (I) the amount of such deduction attributable to net operating
                                              losses (other than the deduction attributable to carryovers
                                              described in clause (ii)(I)), or
                                                 (II) 90 percent of alternative minimum taxable income deter-
                                              mined without regard to such deduction, plus
                                              (ii) the lesser of—
                                                 (I) the amount of such deduction attributable to the sum of
                                              carrybacks of net operating losses for taxable years ending during
                                              2001 or 2002 and carryforwards of net operating losses to taxable
                                              years ending during 2001 and 2002 * * * [Emphasis added.]

                                        Third, in ‘‘Title IV—Tax Technical Corrections’’, the
                                      Working Families Tax Relief Act of 2004 (2004 Act), Pub. L.
                                      108–311, sec. 403(b)(4), 118 Stat. 1187, specified ‘‘clerical
                                      changes’’ to the NOL and ATNOL provisions set forth in 2002




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                                      (573)        METRO ONE TELECOMMS., INC. v. COMMISSIONER                                        577


                                      Act section 102. H. Conf. Rept. 108–696, at 90 (2004). The
                                      2004 Act replaced the word ‘‘carryforwards’’ in section
                                      56(d)(1)(A)(ii)(I) with the word ‘‘carryovers’’, amended sec-
                                      tion 56(d)(1)(A)(ii)(I) by substituting ‘‘from taxable years’’ in
                                      place of ‘‘for taxable years’’, and amended section
                                      56(d)(1)(A)(i)(I) to strike ‘‘attributable to carryovers’’. See
                                      2004 Act sec. 403(b)(4). The 2004 Act also amended the effec-
                                      tive date provision set forth in 2002 Act sec. 102(c)(2), by
                                      substituting ‘‘after December 31, 1990’’ for ‘‘before January 1,
                                      2003’’. Id. sec. 403(b)(3). The amendments in the 2004 Act
                                      were effective as if they had been included in the 2002 Act.
                                      See id. sec. 403(f), 118 Stat. 1188. Following these amend-
                                      ments, section 56(d)(1) provides in pertinent part as follows:
                                       SEC. 56(d). ALTERNATIVE TAX NET OPERATING LOSS DEDUCTION
                                      DEFINED.—
                                         (1) IN GENERAL.—For purposes of subsection (a)(4), the term ‘‘alter-
                                       native tax net operating loss deduction’’ means the net operating loss
                                       deduction allowable for the taxable year under section 172, except that—
                                           (A) the amount of such deduction shall not exceed the sum of—
                                              (i) the lesser of—
                                                 (I) the amount of such deduction attributable to net operating
                                              losses (other than the deduction described in clause (ii)(I)), or
                                                 (II) 90 percent of alternative minimum taxable income deter-
                                              mined without regard to such deduction, plus
                                              (ii) the lesser of—
                                                 (I) the amount of such deduction attributable to the sum of
                                              carrybacks of net operating losses from taxable years ending
                                              during 2001 or 2002 and carryovers of net operating losses to tax-
                                              able years ending during 2001 and 2002 * * * [Emphasis added. 2]

                                      III. Computation of ATNOLD
                                         We interpret a statute by looking first to its text. See Wil-
                                      liams v. Taylor, 529 U.S. 420, 431 (2000); United States v.
                                      Ron Pair Enters., Inc., 489 U.S. 235, 241 (1989). The plain
                                      meaning of the text is generally conclusive if the text is clear
                                      and fits the case. See Sullivan v. Stroop, 496 U.S. 478, 482
                                      (1990) (‘‘ ‘If the statute is clear and unambiguous ‘‘that is the
                                      end of the matter * * * [as a court] must give effect to the
                                      unambiguously expressed intent of Congress.’’ ’ ’’ (quoting K
                                        2 This version of sec. 56(d)(1) was in effect when the petition was filed. Sec. 56(d)(1)(A)(ii)(I)

                                      was later amended by the Worker, Homeownership, and Business Assistance Act of 2009, Pub.
                                      L. 111–92, sec. 13(b), 123 Stat. 2993. That amendment is not applicable here because it applies
                                      (with an exception not relevant here) to taxable years ending after Dec. 31, 2002. See id. sec.
                                      13(e)(2), 123 Stat. 2995.




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                                      578                135 UNITED STATES TAX COURT REPORTS                                        (573)


                                      Mart Corp. v. Cartier, Inc., 486 U.S. 281, 291–292 (1988))).
                                      ‘‘[C]ourts must presume that a legislature says in a statute
                                      what it means and means in a statute what it says there.’’
                                      Conn. Natl. Bank v. Germain, 503 U.S. 249, 253–254 (1992).
                                         Under the applicable version of section 56(d)(1), as under
                                      its predecessors, the starting point in computing an ATNOLD
                                      is ‘‘the net operating loss deduction allowable for the taxable
                                      year under section 172’’, as adjusted for (as relevant here)
                                      the limitation in section 56(d)(1)(A). For purposes of the reg-
                                      ular income tax, section 172(a) allows a deduction equal to
                                      the sum of the NOL carryovers and carrybacks to the taxable
                                      year. Section 172(b)(1)(A) provides generally that an NOL for
                                      a taxable year shall be a ‘‘carryback’’ to each of the 2 taxable
                                      years preceding the loss year and a ‘‘carryover’’ to each of the
                                      20 taxable years following the loss year. Section 172(a) and
                                      (b)(1), by its terms, clearly distinguishes a ‘‘carryback’’ from
                                      a ‘‘carryover’’, indicating that the former goes back in time
                                      and the latter goes forward.
                                         Petitioner argues that, contrary to the text of section
                                      172(a) and (b)(1), its 2004 ATNOL is a ‘‘carryover’’ to 2002 for
                                      purposes of section 56(d)(1)(A)(ii)(I). We disagree. Section
                                      56(d)(1) defines an ATNOLD by cross-reference to an NOL
                                      deduction under section 172, and section 56(d)(1) does not set
                                      forth any period for a ‘‘carryover’’ or a ‘‘carryback’’ of an
                                      ATNOL in determining an ATNOLD. See also Plumb v. Commis-
                                      sioner, 97 T.C. 632, 638 (1991) (explaining that there is not
                                      a separate period of carryover or of carryback for purposes of
                                      the AMT). Because an ATNOLD cannot be determined without
                                      reference to and reliance upon the NOL deduction of section
                                      172, our interpretation of ‘‘carryover’’ for purposes of sec-
                                      tion 56(d)(1)(A)(ii)(I) is guided by the meaning it acquires as
                                      a result of the interplay of sections 56(d) and 172, and the
                                      definition of ‘‘carryover’’ in section 172 must control the
                                      carryover of an ATNOL for purposes of determining an
                                      ATNOLD under section 56(d)(1). We conclude that section
                                      56(a)(1) does not allow for a ‘‘carryover’’ of an ATNOL to a
                                      prior period because section 172 does not allow for a ‘‘carry-
                                      over’’ of an NOL to a prior period.
                                         Petitioner seeks a different conclusion by isolating the
                                      term ‘‘carryover’’ as it appears in section 56(d)(1)(A)(ii)(I)
                                      from the meaning attached to the term by section 172(a) and
                                      (b)(1) or, in other words, by taking the term out of context.




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                                      (573)        METRO ONE TELECOMMS., INC. v. COMMISSIONER                                       579


                                      Petitioner’s approach is mistaken. Interpreting the term
                                      ‘‘carryover’’ in the context of the AMT to permit a carryback
                                      of a loss, as does petitioner, would create illogic in the
                                      application of section 56(d). The period of carryover or of
                                      carryback for purposes of the AMT must be derived from sec-
                                      tion 172(b)(1)(A), which permits a ‘‘carryover’’ of a loss
                                      incurred in 2004 to each of the 20 ‘‘following’’ years. Section
                                      172 has no provision, thus neither does section 56(d)(1), that
                                      would allow for a ‘‘carryover’’ of a loss from 2004 to 2002. A
                                      loss incurred in 2004 may be applied to 2002, for purposes
                                      of the AMT, as for purposes of the regular income tax, only
                                      by means of a ‘‘carryback’’, see sec. 172(b)(1)(A)(i), and such
                                      a carryback, because not from a taxable year ending in 2001
                                      or 2002, is subject to the 90-percent limitation of section
                                      56(d)(1)(A)(i)(II).
                                         Petitioner also argues that the wording change from
                                      ‘‘carryforward’’ to ‘‘carryover’’ in the 2004 Act indicates that
                                      Congress specifically intended that an ATNOL carried to 2002
                                      from a subsequent year be exempt from the 90-percent
                                      limitation. We disagree. The House and Senate conferees
                                      described the changes made to section 56(d)(1)(A) by the
                                      2004 Act as ‘‘clerical’’. H. Conf. Rept. 108–696, supra at 90.
                                      The Staff of the Joint Committee on Taxation did likewise.
                                      See Staff of Joint Comm. on Taxation, Description of the
                                      ‘‘Tax Technical Corrections Act of 2003’’ (JCX–104–03), at 4
                                      (J. Comm. Print 2003). Moreover, the 2004 Act amendments
                                      have a significance opposite to that which petitioner assigns
                                      to them. The 2004 Act modified section 56(d)(1)(A) to bring
                                      clause (i)(I) into closer alignment with section 172(b)(1)(A).
                                      The modifications confirmed that ‘‘carryover’’ in section
                                      56(d)(1)(A)(ii)(I) is to be construed in pari materia with
                                      ‘‘carryover’’ in section 172(b)(1)(A)(ii). The change from
                                      ‘‘carryforward’’ to ‘‘carryover’’ preserves uniformity of lan-
                                      guage between sections 56 and 172 (as section 172 uses the
                                      term ‘‘carryover’’) and is not a substantive change such as
                                      would have the effect petitioner attributes to it.
                                         Petitioner also argues that Congress changed the effective
                                      date of section 56(d)(1)(A) from ‘‘taxable years ending before
                                      January 1, 2003’’ to ‘‘taxable years ending after December 31,
                                      1990’’ to enable taxpayers to carry back losses to 2001 and
                                      2002 under the 2004 Act. We disagree. As we understand
                                      petitioner’s argument, it brings to the fore that the effective




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                                      580                135 UNITED STATES TAX COURT REPORTS                                        (573)


                                      date of the amendments made to section 56(d)(1)(A) by the
                                      2002 Act differs from the effective date of the amendments
                                      made to that provision by the 2004 Act. Petitioner construes
                                      this alteration as support for its position that an ATNOL
                                      incurred in 2004 may be offset against AMTI for 2002 without
                                      applying the 90-percent limitation. Petitioner’s reasoning is
                                      tenuous. Although Congress did not specifically explain its
                                      reason for the change of effective dates, the effective date of
                                      the 2002 amendments (for taxable years ending before
                                      January 1, 2003) was not itself an impediment to the offset
                                      petitioner seeks. Thus, it cannot be said that the change in
                                      effective date came about as a means to facilitate its position.
                                         We note as a final point that the House Committee on
                                      Ways and Means proposed a bill that would have allowed an
                                      NOL deduction attributable to NOL carrybacks arising in tax-
                                      able years ending in 2003, 2004, and 2005, as well as NOL
                                      carryforwards to these taxable years, to offset 100 percent of
                                      the taxpayer’s AMTI. See Staff of Joint Comm. on Taxation,
                                      Description of the Chairman’s Amendment in the Nature of
                                      a Substitute to H.R. 2, the ‘‘Jobs And Growth Tax Act Of
                                      2003’’ (JCX–40–03), at 19–20 (J. Comm. Print 2003). This pro-
                                      posal is consistent with petitioner’s position. Congress, how-
                                      ever, chose not to enact this option. That Congress appar-
                                      ently considered whether to allow such carrybacks and
                                      choose not to do so undercuts petitioner’s claim.
                                      IV. Conclusion
                                         We hold that petitioner’s carryback of the ATNOL from 2004
                                      to 2002 is not a ‘‘carryover’’ within the meaning of section
                                      56(d)(1)(A)(ii)(I) and that section 56(d)(1)(A)(i)(II) precludes
                                      petitioner from deducting an ATNOL that offsets all of its
                                      AMTI for 2002. We have considered all arguments for a con-
                                      trary holding and, to the extent not discussed above, find
                                      those arguments to be without merit. In the light of the par-
                                      ties’ submitting this case to the Court fully stipulated under
                                      Rule 122 our holding results in the entry of decision for
                                      respondent. Accordingly,
                                                                           Decision will be entered for respondent.

                                                                               f




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