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Double tax benefit for NOLs

The new “Worker, Homeownership and Business Assistance Act of 2009” extends and expands the tax break for net operating losses (NOLs) created by the 2009 economic stimulus law. What’s more, some business owners may be able to realize a double tax benefit.
Here’s a quick recap: A business can normally carry back an NOL for two years and then forward for up to 20 years until the loss is exhausted. However, the 2009 economic stimulus law allowed a qualified small business to carry back NOLs for up to five years (either three, four or five years). This opportunity was only available for NOLs in tax years beginning or ending in 2008.
For this purpose, a “small business” was defined as a business with an average of no more than $15 million in gross receipts over the three-year period ending with the tax year of the NOL.
Other businesses could still carry back losses for two up to two years. The new law sweetens the deal in two ways.

  • The election to carry back losses for up to five years is extended to businesses of all sizes, but the carryback to the fifth year is limited to 50% of the available taxable income for the year.
  • The election to carry back losses for up to five years is extended to NOLs incurred in either 2008 or 2009, but generally not both tax years.

However, if an eligible small business elected to carry back a 2008 loss under the prior rules, it can make the election for an additional year. Therefore, your small business may benefit from extended carrybacks for NOLs in 2008 and 2009.
The new tax break for NOLs is available only for a short time. For more details about this new tax break, contact our office and one of our expert staff members will be glad to assist you.