Congress is being urged to extend the net operating loss (NOL) carryback period to five years from the current two-year allowance to help businesses suffering from tough economic times.
A net operating loss occurs when a company’s expenses exceed its profits, which results in a negative taxable income. Right now, companies can use an NOL to offset taxes owed on profits made in the two previous years. For example, if a company had a difficult year in 2008 and had a NOL of $5,000, but made a combined profit of $5,000 in 2006 and 2007, the carryback period allows the business to claim zero net profit for 2006, 2007 and 2008 and receive a refund on any taxes paid on the $5,000 profit in 2006 and 2007.
Extending the carryback period to five years provides companies most in need with increased short-term liquidity in this economic downturn.
The National Marine Manufacturers Association and its 71-member coalition will meet with Congressional leadership to ensure appropriate tax relief is enacted in a timely manner.