Small Business and Consumer Credit Act of 2026

This bill amends the Internal Revenue Code of 1986 to provide specific rules for the treatment of net operating losses (NOLs) incurred by certain financial institutions. These special provisions are designed to offer more flexible tax treatment for qualifying banks and affiliated groups that include specific types of banks. The legislation aims to adjust how these institutions can utilize their losses to offset past or future taxable income. The legislation introduces a phased approach for NOL utilization, effective for losses arising in taxable years beginning after December 31, 2026. For losses incurred in 2027, institutions can elect to carry over NOLs for 20 taxable years , with no carryback provision. For losses in 2028, a one-year carryback is permitted, alongside the 20-year carryover. From 2029 onwards, the rules allow for a two-year carryback period in addition to the 20-year carryover, providing greater flexibility for older losses. To qualify for these rules, an institution must be a "specified financial institution," which includes: Any bank not part of an affiliated group. Members of an affiliated group containing certain banks. Banks as defined in section 585(a)(2)(B). Institutions must elect to apply these rules for a given taxable year, and once made, the election is irrevocable for that year. This elective nature allows institutions to choose the most beneficial treatment for their specific financial situation.