John R. Graham (Duke University, Fuqua School of Business) & Hyunseob Kim (Duke University, Fuqua School of Busines) have posted The Effects of the Length of the Tax-Loss Carryback Period on Tax Receipts and Corporate Marginal Tax Rates on SSRN. Here is the abstract:
We investigate how changes in the length of the net operating loss carryback period affect corporate liquidity and marginal tax rates. We estimate that extending the carryback period from two to five years, as recently proposed by President Obama, would provide $28 ($52) billion of additional liquidity to the corporate sector for 2008 (2009). Our calculations imply that the benefits of the extended carryback period would be concentrated to a few industries. Extending the carryback period would increase the marginal tax rate of loss firms by about 200 basis points on average, which all else equal would lead corporations to use an additional $12 ($14) billion of debt in 2008 (2009) and reduce tax payments by another $2 billion annually. Overall, the tax break proposed by the Obama administration is expected to have a significant liquidity effect on corporations suffering large losses in recent years.
