Question

Can you elaborate on this statement? The Cares Act allows a five-year carryback of an NOL...

Can you elaborate on this statement?

The Cares Act allows a five-year carryback of an NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021. The Cares Act still allows for an indefinite carryforward period so no change to carryforwards just carrybacks.

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Answer #1

The 2017 tax reform legislation 'Tax Cuts and Jobs Act of 2017 (TCJA)'  prohibited the NOL Carrybacks to taxable years ending after December 31, 2017.

However, the CARES Act allows a five-year carryback of any NOL generated in a taxable year beginning after December 31, 2017, and before January 1, 2021. So the NOL can be carried back to two years before the NOL year and applied against any taxable income to get an immediate tax refund. The NOL for 2017 may be carried back to 2015 or 2016.

Tax Cuts and Jobs Act of 2017 (TCJA) lifted the previous 20-year limit on NOL carryforwards, but limited NOLs to 80% of taxable income in any one tax period. The CARES Act temporarily removes this 80% limit for taxable years beginning before 2021 to allow an NOL carryforward to fully offset an organization’s income.

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