The American Recovery and Reinvestment Act of 2009 allowed small businesses (Average Gross Annual Receipts of  $15 million or less) to carry back NOL’s incurred in 2008 to the prior 5 tax years rather than the standard 2 years previously allowed. 

The Worker, Homeownership and Business Assistance Act of 2009, passed into law November 6, 2009,  allows a similar election to businesses of all sizes but with a limitation on the fifth preceding tax year of 50% of taxable income for that year.  The remaining NOL available can fully offset taxable income on the remaining 4 years forward.  Further, the new law expanded the election to include 2008 or 2009 NOL’s incurred, but not for both years. However, if a small business did elect under the American Recovery and Reinvestment Act of 2009 to carry back a 2008 NOL, it may also elect to carry back a 2009 NOL under the Worker, Homeownership and Business Assistance Act of 2009, which enables some small businesses to take advantage of carry backs for up to 5 years for losses incurred in both 2008 and 2009.

The election to take advantage of  these new provisions must be made by the due date of the 2009 tax return (tax year beginning January 1, 2009 or after). Once the election is made, it is irrevocable.  If the taxpayer previously elected to carry forward rather than carry back a 2008 NOL (for tax year ending before November 6, 2009), that election may be revoked if done so by the due date of the 2009 tax return.

There are additional specific limitations to the new law for Insurance companies and any taxpayer receiving TARP (Troubled Asset Relief Program) funds.

If you have questions about these new provisions, please contact our office at your earliest convenience.