Question

The newly enacted tax cuts and jobs act in 2018 provides sweeping changes to corporate tax law, including major changes to the utilization of net operating losses( NOLs) for corporate taxpayers. which one of the following is true?

a. NOL carrybacks have been eliminated in most cases.

b. NOLs can be carried forward up to 20 years

c. NOLs can be carried forward indefinitely at 100% of the taxable income

d. NOLs can be carried back up to 2 years.

Answer 1

Option a.

NOL carrybacks have been eliminated in most cases.

A net operating loss (NOL) is when business losses exceed income.

Prior toJanuary 1, 2018, NOLs were able to offset 100% of taxable income. They were allowed to be carried back two years and carried forward for twenty years. You could affirmatively elect with a timely filed return to NOT carryback (the default) and instead carry forward only (permanent, could not change it for that year).

Under the new law effective in 2018, an NOL can offset only 80% of taxable income in any given tax year. NOLs can be carried forward only. The 20-year carryforward period is changed to an indefinite carryforward period NOLs created in tax years beginning before January 1, 2018 are subject to the old rules. Only NOLs generated in tax years beginning after December 31, 2017 are subject to the new rules.