§ 11-654.1 Net operating loss.
AC § 11-654.1
1.In computing the business income subject to tax, taxpayers shall be allowed both a prior net operating loss conversion subtraction under subdivision two of this section and a net operating loss deduction under subdivision three of this section. The prior net operating loss conversion subtraction computed under subdivision two of this section shall be applied against business income before the net operating loss deduction computed under subdivision three of this section.
2.Prior net operating loss conversion subtraction.
(a)Definitions.
(1)"Base year" means the last taxable year beginning on or after January first, two thousand fourteen and before January first, two thousand fifteen.
(2)"Unabsorbed net operating loss" means the unabsorbed portion of net operating loss as calculated under paragraph (f) of subdivision eight of section 11-602 of this chapter or subdivision (k-1) of section 11-641 of this chapter, as such sections were in effect on December thirty-first, two thousand fourteen, that was not deductible in previous taxable years and was eligible for carryover on the last day of the base year subject to the limitations for deduction under such sections, including any net operating loss sustained by the taxpayer during the base year.
(3)"Base year BAP" means the taxpayer's business allocation percentage as calculated under paragraph (a) of subdivision three of section 11-604 of this chapter for the base year, or the taxpayer's allocation percentage as calculated under section 11-642 of this chapter for purposes of calculating entire net income for the base year, as such sections were in effect on December thirty-first, two thousand fourteen.
(4)"Base year tax rate" means the taxpayer's tax rate for the base year as applied to entire net income and calculated under subdivision one of section 11-604 of this chapter or subdivision (a) of section 11-643.5 of this chapter, as such provisions were in effect on December thirty-first, two thousand fourteen.
(b)The prior net operating loss conversion subtraction shall be calculated as follows: (1) The taxpayer shall first calculate the tax value of its unabsorbed net operating loss for the base year. The value is equal to the product of (i) the amount of the taxpayer's unabsorbed net operating loss, (ii) the taxpayer's base year BAP, and (iii) the taxpayer's base year tax rate.
(c)(1) Where a taxpayer was properly included or required to be included in a combined report for the base year pursuant to section 11-605 of this chapter or a combined return for the base year pursuant to section 11-646 of this chapter, as such sections were in effect on December thirty-first, two thousand fourteen, and the members of the combined group for the base year are the same as the members of the combined group for the taxable year immediately succeeding the base year, the combined group shall calculate its prior net operating loss conversion subtraction pool using the combined group's total unabsorbed net operating loss, base year BAP, and base year tax rate.
(d)The prior net operating loss conversion subtraction may be used to reduce the taxpayer's tax on allocated business income to the higher of the tax on business capital under clause (ii) of subparagraph one of paragraph (e) of subdivision one of section 11-654 of this subchapter or the fixed dollar minimum under clause (iv) of subparagraph one of paragraph (e) of subdivision one of section 11-654 of this subchapter. Unless the taxpayer has made the election provided for in subparagraph four of paragraph (b) of this subdivision, any amount of unused prior net operating loss conversion subtraction shall be carried forward to a subsequent tax year or subsequent tax years until the prior net operating loss conversion subtraction pool is exhausted, but for no longer than twenty taxable years or the taxable year beginning on or after January first, two thousand thirty-five but before January first, two thousand thirty-six, whichever comes first. Such amount carried forward shall not be subject to the one-tenth limitation for the subsequent tax year or years under subparagraph three of paragraph (b) of this subdivision. However, if the taxpayer elects to compute its prior net operating loss conversion subtraction pursuant to subparagraph four of paragraph (b) of this subdivision, the taxpayer shall not carry forward any unused amount of such prior net operating loss conversion subtraction to any tax year beginning on or after January first, two thousand seventeen.
3.In computing business income, a net operating loss deduction shall be allowed. A net operating loss deduction shall be the amount of net operating loss or losses from one or more taxable years that are carried forward or carried back to a particular taxable year. A net operating loss shall be the amount of a business loss incurred in a particular tax year multiplied by the business allocation percentage for that year as determined under subdivision three of section 11-654 of this subchapter. The maximum net operating loss deduction that is allowed in a taxable year shall be the amount that reduces the taxpayer's tax on allocated business income to the higher of the tax on business capital under clause (ii) of subparagraph one of paragraph (e) of subdivision one of section 11-654 of this subchapter or the fixed dollar minimum amount under clause (iv) of subparagraph one of paragraph (e) of subdivision one of section 11-654 of this subchapter. Such net operating loss deduction and net operating loss shall be determined in accordance with the following: (a) Such net operating loss deduction shall not be limited to the amount allowed under section one hundred seventy-two of the internal revenue code or the amount that would have been allowed if the taxpayer did not have an election under subchapter S of chapter one of the internal revenue code in effect for the applicable tax year.
(e)Such net operating loss deduction shall not include any net operating loss incurred during any taxable year commencing after January first, two thousand fifteen if the taxpayer was subject to tax under subchapter two or three of this chapter in that year; provided, however, any year commencing after January first, two thousand fifteen that the taxpayer was subject to tax under subchapter two or three of this chapter in that year must be treated as a taxable year for purposes of determining the number of taxable years to which a net operating loss may be carried forward.
(f)Where there are two or more allocated net operating losses, or portions thereof, carried back or carried forward to be deducted in one particular tax year from allocated business income, the earliest allocated loss incurred must be applied first.
(g)A taxpayer may elect to waive the entire carryback period with respect to a net operating loss. Such election must be made on the taxpayer's original timely filed return (determined with regard to extensions) for the taxable year of the net operating loss for which the election is to be in effect. Once an election is made for a taxable year, it shall be irrevocable for that taxable year. A separate election must be made for each taxable year of the loss. This election applies to all members of a combined group.
