Tax Reform Series 30 – Net Operating Losses


Plain Language of Change:

  • Effective for net operating losses that arise in tax years beginning after December 31, 2017, the net operating loss deduction for a tax year is limited to the lesser of:
    • the aggregate of net operating loss carryovers (i.e., carryforwards) to the tax year, plus net operating loss carrybacks to the tax year, or
    • 80 percent of taxable income computed for the tax year without regard to the net operating loss deduction allowed for the tax year
  • Since the 80 percent taxable income limit applies to losses arising in tax year beginning after December 31, 2017, net operating loss carrybacks and carryforwards attributable to losses that arose in tax years beginning before January 1, 2018, are not subject to the 80 percent limitation
  • The new law eliminates the carryback of all NOLs except for NOLs attributable to farm losses and certain insurance companies
  • NOLs arising after December 31, 2017 can be carried forward indefinitely
  • Farm losses can be carried back 2 years and forward indefinitely for losses arising after December 31, 2017
  • Casualty & property insurance company losses can be carried back 2 years and forward 20 years for losses arising after December 31, 2017

Detailed Analysis of Net Operating Losses

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