HR 3548 was approved by Congress and is heading to the White House for President Obama’s signature. This law, referred to as the Worker, Homeownership and Business Assistance Act of 2009, includes two temporary tax incentives. The first, the Home Buyer Credit is discussed here. The second, the extension and expansion of Net Operating Loss (NOL) carryback rules is discussed below.
Normally, an NOL can generally be carried back two years and forward twenty to offset past and future taxable income with a specific year’s tax loss. The expansion of these rules will help taxpayers receive quick refunds, providing cash to sustain their operations. Now, eligible businesses can carryback NOLs incurred in 2008 or 2009 up to five years, but with a 50-percent income limit on NOL offsets in the fifth year.
The NOL carryback provisions in this bill will assist many businesses that are struggling to survive in our current economic climate, providing what is estimated as $34 billion of immediate tax relief. The expanded NOL carryback, which will now be applicable to all U.S. business taxpayers, except those specifically excluded, is a big change from the American Recovery and Reinvestment Act of 2009 , which limited its expanded NOL carryback provisions to eligible small businesses (with average gross receipts of $15 million or less).
This change in law provides an immense opportunity for tax savings and immediate cash flow.
If you would like to discuss your current situation including an analysis of your current tax position and the optimal use of a current Net Operating Loss, please call our offices and ask to speak to one of our shareholders or email us at info@taxwarriors.com.