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Extended NOL Carryback Enacted for all Businesses

On Nov. 6, Congress passed and the President signed into law the Worker, Homeownership, and Business Assistance Act of 2009 (H.R. 3548). Publicity around the legislation has centered on its extensions of unemployment benefits and the credit for those buying homes. However, Section 13 of the Act provides a key federal income tax break for businesses large and small: an extension from the ordinary 2 to 5 years for net operating loss carry-backs, or NOLs. Ordinarily, a business that suffers an operating loss during a tax year may offset that loss (carry it back) against taxable profits in either of the preceding two tax years, file an amended return for those years and get back some of the tax it paid. The Act extends the carry-back period to five years for losses suffered in either 2008 or 2009 tax years. (The Act allows only smaller business to carry back losses for both years.) This is important since while many businesses have losses for this year and for 2008, some also have losses – or at best only small profits – for other recent years, leaving them, before this new provision, with no way to recover needed operating cash. The federal stimulus package enacted by Congress earlier this year included much the same NOL extension, but only for small businesses, defined as those with no more than $15 million in annual gross receipts. The Act makes the provision available to any businesses (except those which have benefited from federal bail-outs), effective immediately. The Internal Revenue Service has already announced that it expects to issue taxpayer guidance on the expanded NOL option shortly. Contact: Bob Pitcher at bpitcher@trucking.org.

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