Cleanlink News November 10 2009
Congress Passes Bill To Aid Businesses
On November 6th, both houses of Congress passed and the President signed into law H.R. 3548, the Worker, Homeownership, and Business Assistance Act of 2009. Among its other provisions, this legislation contains a change in Net Operating Loss (NOL) carryback tax rules. Under the new law, companies will be permitted to charge back losses sustained in 2008 or 2009 (but not both) against taxes on previous profits for five years. Previous tax rules allowed an NOL carryback of only two years, clearly inadequate given the prolonged economic downturn.
The American Recovery & Reinvestment Act of 2009 (the stimulus bill) enacted by Congress earlier this year included an NOL extension but, despite the opposition from many groups, Congress chose to limit the use of the new 5-year carryback to companies with $15 million or less in annual revenue and applied the extension only to 2008 losses.
The prolonged recession and crisis-level joblessness convinced Congress to take more aggressive action: under the legislation just signed into law the new 5-year carryback is available to companies of all sizes and can be applied against losses in either 2008 or 2009. According to a study by the National Bureau of Economic Research, the new tax law could provide $34 billion in business tax relief.
Miscellaneous notes regarding the new law:
• Companies which accepted TARP funds are not eligible for the new carryback;
• The amount of a loss carried back to the 5th taxable year would be limited to 50 percent of the company‚s taxable income;
• Small businesses would not be subjected to that 50 percent limitation; and
• Businesses with gross receipts of $5 million or less would be permitted to carry back losses from both 2008 and 2009.
The text of the legislation providing this new NOL extension can be found here (the NOL language begins on page 24). Companies which believe they may be in a position to utilize this new tax provision should consult their tax advisors.
