NOL Deduction Modified By New Tax Rules

A "net operating loss" ("NOL") arises when the amount of a taxpayer's business deductions for the current tax year exceed its gross income for the current tax.  Prior to the enactment of the 2017 Tax Cuts and Jobs Act (generally effective for tax years beginning after December 31, 2017) (the "Tax Act"), if a taxpayer had an NOL, the amount of the NOL could be carried back to prior tax years or carried forward to future tax years as a deduction against taxable income.  NOLs were generally permitted to be carried back to the two years preceding the loss year and then carried forward for up to 20 years following the loss year.

Under the Tax Act, NOLs are now limited to 80% of taxable income (determined without regard to the deduction).  NOLs carried to other tax years must be adjusted to reflect this limitation.  Additionally, the carryback of NOLs to prior tax years has been eliminated but unused NOLs, with limited exceptions, may now be carried forward to subsequent