01 Apr CARES Act – Net Operating Losses

The 2017 tax reform bill changed the treatment of NOLs and could only be carried forward. The CARES Act relaxes these limitations on a corporation’s use of NOLs. The CARES Act allows businesses to carry back NOLs incurred in 2018, 2019, and 2020 for five years (excluding offset to untaxed foreign earnings transition tax).

OUR BOTTOM LINE: This could be significant for businesses that have the ability to carry back NOLs to offset income that was taxed at 35% before 2017 tax reform. If there are refunds available by operation of these new rules, corporations can use the IRS’s quick refund procedures (Form 1139) to claim the refund.