NOL Treatment on Federal Corporate and Individual Tax Returns: Challenges for Preparers

The recent CARES Act requires a fresh look at NOLs. Before the 2017 tax act, taxpayers could choose to carryback an NOL two years and receive an immediate refund or carryforward the loss up to 20 years. Then under the 2017 tax act, carrybacks were eliminated and losses were carried forward indefinitely. Now losses for 2018-2020, for calendar year taxpayers, can be carried back a generous five years.

Under the 2017 tax act, the carryforward deduction was limited to 80% of taxable income. Now this limitation has been suspended for losses incurred for tax years beginning after 2020. Understanding these continually changing rules and tracking these NOL carryforwards present constant challenges for tax professionals.

Businesses continue to face several restrictions in computing NOLs. Ownership changes made under Section 382 impose special restrictions on the use of the NOL as a tax attribute. Loss deductions annually cannot exceed a limitation calculated under 382 based on the value of the loss corporation's stock and the applicable federal long-term rate.

Proposed regulations issued in September 2019 significantly limit a corporation’s ability to utilize losses if it has net unrealized built-in gains (NUBIGs). Understanding how to calculate the limitation and the impact of the proposed regulations on these companies is critical for advisers working with these businesses.

Listen as our experienced panel of tax advisers provides a thorough and practical guide to mastering NOL calculations, planning opportunities under the CARES Act, and the proposed 382 regulations.

1. Net operating losses – an overview
   1. New carryback rules
   2. Foregoing the carryback
2. Special issues with NOLs for corporate return taxpayers
3. Section 382 ownership change restrictions and limitations
4. Restrictions and allowances in calculating and using NOLs for individual taxpayers
5. Pass-through allocations

The panel will address these and other problematic aspects of NOLs:

• New procedures for submitting Forms 1139 and 1045
• When Section 382 change in ownership limitations apply
• The effect of the proposed regulations on Section 382 limitations
• Challenges in allocating NOLs to shareholders of pass-through entities

Learning Objectives

After completing this course, you will be able to:

• Identify proper calculation of NOLs, including allowable deductions
• Discern how to account for pre- and post-tax reform losses
• Determine the effect of the proposed regulations on the Section 382 limitation
• Ascertain when Section 382 limitations apply

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Foundational knowledge and understanding of calculating and reporting net operating losses for individuals and businesses; familiarity with Sec. 382 limitations and alternative minimum tax.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).