The National Association of Manufacturers pushed hard for passage of five-year Net Operating Loss (NOL) tax relief this year as critical to promoting investment and aiding the recovery. The NAM certainly counts President Obama’s signing of H.R. 3545, the unemployment insurance bill with the NOL tax relief, as a big help to many manufacturers.

And retail too! Ian Swanson of The Hill reports that angle today in “Black Friday boom? Retail sales boosted by carry-back legislation“:

“We think it will have a benefit,” said Craig Sherman, vice president of government affairs for the National Retail Federation (NRF), which lobbied vigorously for the measure.

Sherman said the provision will help retailers by providing money to pay for adding inventory or to hire more workers to meet the masses of December shoppers. Without the change in tax law, firms could only carry back losses to the last two tax years. Given the recession, that didn’t help many retailers who had seen minimal or no profits over the past two years.

Even if the money isn’t yet technically available, Sherman said retailers are using the incoming funds as collateral to get loans from their banks.

The NAM’s webpage with background and documents on the new NOL law is here.

The National Retail Federation previewed Black Friday sales earlier this week with a survey and news release, “Black Friday Bargains to Attract Up to 134 Million Shoppers This Year.”

Latest tax developments …

From Reuters, “Tax loss carryback proposal gaining U.S. support“:

WASHINGTON (Reuters) – A proposal to expand U.S. companies’ ability to apply losses in 2008 or 2009 over the prior five years to get immediate cash is gaining traction in the U.S. Congress.

All companies, no matter what size, would be able to apply losses in one of those years to full year taxable income for the prior four years and to 50 percent of income in the fifth year, according to a summary of a plan backed by Senate Majority Leader Harry Reid and Senate Finance Chairman Max Baucus, both Democrats.

The NAM’s web materials supporting Net Operating Loss legislation are available here.

Bloomberg, “Nelson Says Senate to Extend, Reduce Homebuyer Credit“:

Oct. 26 (Bloomberg) — Senate leaders are negotiating to extend and gradually reduce an $8,000 tax credit for first-time homebuyers through 2010, Senator Bill Nelson of Florida said.

UPDATE (12:20 p.m.): The Washington Examiner today has a First-Time Homebuyers’ Guide insert with this story, “‘Good chance’ Congress will vote to extend tax credit,” interviewing Rep. Frank Kratovil (D-MD), a Realtor. Extend the credit, but not expand it, is the conclusion.

And can you believe that the great, obscurely visionary Mancunian band, The Fall, has paid tribute to the carryback tax provisions? Well, listen to this clip and say it isn’t so.

Bloomberg, “Congress Cuts Big Business Tax Break in Stimulus Bill“:

Feb. 11 (Bloomberg) — House and Senate negotiators all but eliminated the biggest tax cut for businesses in the compromise agreement on an economic stimulus bill, Senator Max Baucus of Montana said.

The provision, a top priority of business groups including the National Association of Manufacturers and the U.S. Chamber of Commerce, would let companies convert losses into tax refunds.

The provision is the “net operating loss” relief, enumerated as a priority for manufacturers in the NAM’s recent “Key Vote” letter on H.R. 1. More from the Bloomberg story:

Monica McGuire, senior policy director in charge of taxation for the manufacturers’ association, said omitting the provision would diminish the legislation’s stimulus effect.

What McGuire termed the “gutting” of the relief provision “doesn’t contribute to an effective recovery package,” she said. “Restoring adequate tax relief for struggling companies is about helping a diverse range of industries from manufacturing to retail; no plants, no workers.”

From the Wall Street Journal, “Stimulus’s Winners and Losers”

WASHINGTON — Home builders, new-car buyers and manufacturers are among the major winners in a $838 billion economic-rescue bill passed in the Senate Tuesday while state governments and generously paid corporate executives will be the losers.

The Senate’s economic stimulus package contains several major amendments and saw an overhaul last week when Senate Democrats agreed to changes pushed by Sens. Susan Collins (R., Maine) and Ben Nelson (R., Neb.).

And…

Manufacturers, home builders and firms in other sectors that were unprofitable in 2008 and 2009 would gain the ability under the Senate bill to turn their losses into tax refunds. The bill allows them to use those losses to offset tax liability as far back as 2003.

The Senate provision is slightly more generous than a similar 5-year net operating loss carryback provision in the House bill. It would allow firms to carry back 100% of losses, while only 90% of losses would be eligible for the 5-year carryback under the House bill.

“Manufacturing is general is a cyclical industry, so net carryback loss is very important,” said Dorothy Coleman, vice president of tax and domestic economic policy at the National Association of Manufacturers. “Typically any industry that is cyclical would benefit from this.”

Given the severe economic challenges facing our nation, policymakers are wise to look at tax relief to help carry many American businesses during a very rough patch. Contrary to the claims raised in recent stories in The Wall Street Journal (“Write-Offs a Boon to Builders, Bankers“) and the Washington Post (“Lawmakers and Financial Experts Question Obama’s Tax Cuts“), extending the period in which struggling companies can “carry back” current net operating losses or NOLs will help a wide cross-section of industries, including the manufacturing sector. The press needs only to look at a recent letter to Congress urging prompt enactment of NOL relief, which was signed by some 70 trade associations, to see the broad range of interest in the proposal.

Notably, the NOL carryback proposal it describes falls squarely within the three factors the Post’s editorial board uses to judge tax provisions in the stimulus package: targeted, timely, and temporary. (“Dr. Obama’s cure.”) It’s also important to understand that this tax relief is purely a timing issue, helping companies gain quick access to cash now rather than in the future. Specifically, the relief would temporarily change the current carryback period from 2 to 5 years for NOLs incurred in 2008 and 2009.

For manufacturers, NOL relief has a proven track record of helping companies and workers through tough times. In the wake of the 9/11 terrorist attacks, legislators extended the carryback period, a life saver for many manufacturers and manufacturing jobs. In fact, the CEO of one NAM member company, Owens-Illinois’ Joseph Lemieux, wrote a letter to President Bush citing the jobs restored and the plant reopened as a direct result of the enacted NOL relief. Union leaders, company management, and employees collectively praised the plant reopening back in April 2002. (See this AP story for more.) Previous NOL relief enacted in 1997 also produced effective results.

The proven track record of NOL relief speaks volumes, not rhetoric. Bottom line, struggling companies will be able to get an infusion of cash right now, when they need it the most.