Taxation

Ca. Tax Lawyer 2017, VOLUME 26, NUMBER 3

Tax Procedure: California Should Conform to Federal Law and Allow Expedited Tentative NOL Refunds1

By Benjamin Elliott & Lauren Knapp2

I. EXECUTIVE SUMMARY

California passed legislation in 2010 allowing Net Operating Losses ("NOLs") attributable to taxable years beginning on or after January 1, 2013, to be carried back by taxpayers to the two prior tax years, similar to the Federal rules.3

The NOL carryback rules allow taxpayers to use NOLs sooner than they otherwise would be able to without a carryback provision, thereby providing taxpayers with a refund where they otherwise may need to wait several years to be able to use the NOLs in the future, if ever. Further, while use of NOL carryforwards were suspended in California for most taxpayers4 during taxable year beginning on or after January 1, 2011, taxpayers using this new NOL carryback rule are allowed to carryback NOLs from applicable years into 2011 when such taxpayers were not otherwise allowed to use NOL carryovers.

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