Net Operating Losses

Q.Can my company get a refund check for a net operating loss (NOL) this year?

A. Probably. The new Worker, Homeownership, and Business Assistance Act includes a significant expansion of the NOL rules, which were scheduled to expire this year.

Under a previous law, small businesses (defined as having average gross receipts of $15 million or less) could elect to carry back 2008 net operating losses (NOLs) for either three, four, or five years to claim
refunds of federal income taxes paid in earlier years. This was a beneficial exception to the general NOL carryback rule, which allows businesses to carry back most losses only two years.

The new law expands a similar election to all businesses -- no matter how high their gross receipts are. Under the Worker, Homeownership, and Business Assistance Act, businesses can carry back NOLs for up to five years, but in the fifth year, there is a 50 percent income limit on the NOL offsets.

It can be a great way for eligible businesses that are hurting in today's economy to improve cash flow with a refund of taxes they paid years ago when profits were up.

This is just a basic outline of NOLs. The rules are complex. For more information, contact your tax adviser. 


The information in this Tax Guide is for general guidance only, and does not constitute legal advice, tax advice, accounting services, investment advice, or professional consulting. The information should not and may not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making decisions or taking actions, consult a professional adviser who has been provided with all pertinent facts relevant in your particular situation. Tax articles in this Guide are not intended to be used, and cannot be used, for the purpose of avoiding accuracy-related penalties that may be imposed on a taxpayer.