Companies looking at losses in 2008 or 2009 have won an important tax break from Washington designed to improve cash flow.

When President Barack Obama signed the Worker, Homeownership, and Business Assistance Act of 2009 into law last week, the measure did more than extend unemployment benefits for millions of Americans still looking for work. It also gave companies the ability to carry back a 2008 or 2009 net operating loss as far as five years to recoup taxes paid in prior years. Typically companies can only carry losses back two years.

David Culp, senior manager with KPMG, said companies reporting a net operating loss in any tax year that begins or ends in either 2008 or 2009 can claim a refund from the Internal Revenue Service on taxes paid as far back as five years earlier as a result of the new law. It is a one-time allowance, he said, so companies with losses in more than one year need to look carefully at where the one-time, five-year carry-back will produce the greatest tax benefit.

“There have been many corporations hoping for this,” Culp said. “Any taxpayer can make this election to carry back a loss five years instead of the usual two years.”

Carrying back a current loss to earlier tax years enables a company to offset taxes paid in profitable years. Extending the carry-back from two years to five years increases the amount that a company might recoup. The National Association of Manufacturers said the measure will provide hard-hit companies with cash to finance ongoing operations and retain jobs.

NAM said the provision is especially important because a two-year carry-back doesn’t provide adequate relief during a prolonged economic downturn. NAM said 20 percent of its small and medium-sized members reported net operating losses in 2008, and that’s expected to double in 2009.