Taxpayers could temporarily carry back net operating losses for five years in Louisiana under a bill introduced in the House of Representatives.
H.B. 25, introduced June 4 by Rep. Mark Wright (R), would allow taxpayers to elect to carry back NOL deductions to each tax year before the loss occurred for tax years starting on or after January 1, 2017, through tax years beginning before January 1, 2022.
The bill was referred to the House Ways and Means Committee, of which Wright is a member.
The state Department of Revenue would be required to issue rules for the election.
Under the measure, refunds due as a result of NOL carrybacks would bear interest “at the rate provided in present law computed 90 days after the date the request for tentative refund or claim for refund is filed or 90 days after the due date, without regard to extensions of time, of the loss year return, whichever is later,” according to the bill's digest.
Under existing law, NOLs can't be carried back on corporate returns and the state doesn't allow for refunds of NOL deductions in excess of a corporation's tax liability, according to the digest.
Existing law does allow for NOL deductions on returns filed on or after July 1, 2015, but the deduction can't exceed 72 percent of net Louisiana income, the digest says. The state also allows NOL carryovers for 20 years.
H.B. 25 would provide an adjustment for the specified tax years by lowering "Louisiana net income in an amount equal to the aggregate of net operating loss carryovers to the tax year and the NOL carrybacks to the tax year unless carryback treatment is relinquished by the taxpayer," according to the digest.
Wright sponsored a measure (H.C.R. 76) during the regular session asking that changes to NOLs in the federal Coronavirus Aid, Relief, and Economic Security Act be addressed during the special session. The measure was adopted, and the matter is among topics that may be addressed during the special session that is being held until June 30.
The CARES Act temporarily loosened the limits imposed on NOL carrybacks under the federal Tax Cuts and Jobs Act by allowing taxpayers to carry back NOLs from 2018, 2019, and 2020 for five years. The change is meant to help businesses with cash flow problems resulting from the COVID-19 pandemic.
H.B. 25 is meant to mirror the NOL provisions in the CARES Act, an aide for Wright told Tax Notes June 5.
William M. Backstrom Jr., partner at Jones Walker LLP, said June 5 that in 2015 Louisiana eliminated the three-year NOL carryback and imposed two limitations on the amount of deductible NOLs. The proposed law would temporarily remove the limitations for the 2017–2021 tax periods.
Backstrom told Tax Notes that the bill “will provide some relief to businesses and allow them to put some money in the bank pretty quickly,” adding that "there’s pretty good momentum for this for the good of helping businesses to recover. Hopefully, it will pass in some form.”