Business Losses and NOLs Expanded
May 13, 2020
- Net operating loss (NOL) carrybacks for losses generated after December 31, 2017
- Postponement of excess business loss limitation and relief for limitations incurred in 2018 and 2019
Net Operating Losses
Previously, NOLs generated beginning in 2018 were limited to 80% of taxable income computed without regard to any NOL deduction. Any unused NOL was not able to be carried back but could be carried forward indefinitely.
The CARES Act permits individuals with NOLs generated in taxable years beginning after December 31, 2017, and before January 1, 2021, to carry back such NOLs five taxable years. Such NOLs not carried back may continue to be carried forward indefinitely. The CARES Act also eliminates the 80% taxable income limitation imposed by the TCJA for taxable years beginning before January 1, 2021.
- Taxpayers with NOLs generated in 2018 and 2019 may find it advantageous to amend returns prior to those years to carryback NOLs to years with taxable income subject to a 39.6% tax rate.