Apache Corporation and Subsidiaries, 165 T.C.11, filed 11/13/25, have an esoteric question for Judge Emin (“Eminent”) Toro, whose opinion garners some fifteen (count ’em, fifteen) adherents, one concurrence, and a split decision from Judge James S. (“Big Jim”) Halpern.

Seems the Apaches had to bat clean-up in what my Texan relatives call th’awl bidniz, giving the Apaches a Section 172(f)(1) specified liability loss. Rather than the straight two-back-twenty-forward NOL, the lucky (?) holder of a SLL gets a ten-year carryback.

The Apaches also have a regular NOL they want to carry forward, so they filed an election to forego the two-year carryback for the regular NOL per Section 172(b)(3) and Reg. Section 1.1502-21(b)(3).

Except.

The Apaches specifically state they’re waiving nothing as to the SLL and take the ten-year carryback. They also stip with IRS that they’re not claiming the SLL’s sibling product liability loss carryback.

IRS says it’s all or nothing.  Waive two means waive ten.

Negatory, says Judge Eminent Toro.

There are various NOL carrybacks differing from the general 2-back-20-forward, like some individual casualty and disaster losses, or farming losses. But the whole loss gets carried back to the earliest year of the permitted cycle, unless carryback is elected out. SLLs, however, can be elected back into the 2-back-20-forward régime. Section 172(b)(5) also provides that an SLL can be treated as a separate NOL after the regular SOL has been taken into account for the relevant year.

Clear? Thought not.

But Judge Eminent Toro does an adroit dictionary chaw, coming up with separate periods of time for each enumerated NOL. Yes, NOLs are unitary, one per taxpayer, but its components may permit utilization thereof in more than one timeframe.

“Reading section 172(b)(3) as providing a taxpayer with an all or nothing election—relinquish each and every one of the periods set out in section 172(b)(1) or be stuck with all of them—makes little sense given the number of different carryback periods set out in section 172(b)(1). It also makes little sense in view of Congress’s going out of its way to give taxpayers additional choices when it comes to specified liability losses, see I.R.C. § 172(f)(6), eligible losses, see I.R.C. § 172(b)(1)(E)(iv), and farming losses, see I.R.C. § 172(h)(2).10 The Government itself recognized as much when interpreting a prior version of the statute.” 165 T. C.11, at p. 15.

And IRS has treated product liability NOLs separately from the general NOL. No reason to treat clean-ups differently. Likewise, in close calls, taxpayer wins.

As for the partial dissent, whatever the previous incarnation of this statute said, the current version is the law. Summary J for the Apaches.

Judge Ronald L. (:”Ingenuity”) Buch concurs, simply because of the tie-breaker. Where either the split or the all-or-nothing approach is equally plausible, taxpayer wins.

Judge Big Jim Halpern says even if he buys the idea of separate carrybacks for pieces of NOLs (which he doesn’t), he doesn’t buy waiving some and keeping others.

“The relevant policy question is whether a taxpayer with an NOL that includes an SLL should be able to have its cake and eat it, too, by carrying its SLL back ten years while forgoing the carryback of the rest of its NOL and thereby avoiding the displacement of other tax attributes generated in the more recent years. I agree that there may be no compelling reason to require the taxpayer to give up the carryback of its SLL as the price of preserving the tax attributes that would be displaced by the carryback of the rest of the taxpayer’s NOL. But I am also unaware of a strong policy reason to allow selective carryback waivers. The stated reason for the carryback waiver in the first place would be achieved by either a selective or an all-or-nothing waiver election.” 165 T. C.11, at p. 35.

So neither aside should get summary J, and Apache should either carryback two and ten, or carryforward everything for twenty.

Taishoff says, here comes the appeal.