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5-Year NOLs for businesses with 3-year gross receipts averaging up to $15 million
February 13, 2009
As rumored yesterday, the stimulus monstrosity conference negotiators trimmed back the provision that would allow businesses to carry net operating losses back five years, instead of the normal two years. The conference bill only allows businesses with average gross receipts for the prior three years of up to $15 million to carry back losses five years, and now the five-year carryback only applies to 2008 losses (years beginning or ending in 2008 for fiscal-year filers).
Individuals who generate 2008 NOLs via sole proprietorships or from pass-through entities will be eligible for the five-year carryback if their gross receipts, including their share of the pass-through entity's gross receipts, meet the $15 million limit.
So large businesses who are struggling for cash to avoid layoffs and keep the doors open, and who right now could really use some of the taxes they paid during the good times, are out of luck, because the government wants to keep their money to "create jobs." Score another moronic victory for the Jellyfish Caucus.
How does this work for alternative minimum tax?
The five-year carryback is allowed for computing AMT, but the 90% limit of Section 56(d)(1)(A)(i)(II), which keeps taxpayers from completely eliminating prior year liability with an NOL carryback, remains in place for the five-year carrybacks.
UPDATE: more on the NOL provisions
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Comments
where did you get the information regarding treatment of taxpayers who do business through pass-through entities, and including the share of the partnership or S corporation's gross receipts in determining the $15M limitation. in reading the bill i couldn't see how that would work. thanks.
Posted by: Tracy | February 14, 2009 6:15 AM
Do the three averaged years have to be consecutive?
Posted by: mark w. | February 14, 2009 10:11 AM
I would also be curious as to how you got to the gross receipts pass-through? I am currently researching the "holes," if any, in Sec 172(b)(1)(4)(iii) which defines an eligible "small business" so as to include the pass-through NOL to an active LLC member who receives no W-2 wages from the LLC (which is his only livlihood)..
Posted by: Kevin Santry | February 24, 2009 6:05 PM