Net Operating Loss (NOL) Changes Due to COVID-19
On March 27, 2020, Congress enacted the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act. Among other things, the Act addresses net operating losses (NOLs) and other related provisions.
For example:
Section 2303 allows a five-year carryback for NOLs arising in the 2018, 2019, and 2020 tax years. Section 2303 also temporarily repeals the 80% of income limitation for tax years beginning before 2021.
Section 2304 temporarily repeals the loss limitation for individuals, estates and trusts under section 461(l) of the Internal Revenue Code for tax years beginning before January 1, 2021.
Section 2306 added a special rule to section 163(j) of the IRC for tax years 2019 and 2020.
Section 2307 made some technical amendments to section 168(e) of the IRC relative to qualified improvement property.
The above-provisions apply when a taxpayer calculates Montana taxable income. Note, sections 2303 and 2304 don't apply to C corporations having a Montana filing obligation.
As a result:
1. Some taxpayers may have to amend their 2018 and 2019 tax returns;
2. Individuals, estates and trusts with an NOL incurred in tax years 2018 or 2019 may carry their NOL back five years and amend the corresponding returns filed in those years. A waiver of the carryback period will be available on their 2020 Montana income tax return for each impacted tax year.
We recommend that individuals, estates and trusts who amend returns from tax years 2013 through 2019 to calculate or carry back an NOL wait until the department issues guidance on a revised Montana Form NOL covering the period 2018 through 2020.
For Corporations, amended return instructions and Net Operating Loss provisions remain unchanged. See the Corporate Income Tax Return Instructions for more information.