Origin: The net operating loss (NOL) deduction is a current year deduction available to certain corporate excise filers that have sustained losses in prior taxable years. The deduction is allowed against gross income when determining Massachusetts net income, which on an apportioned basis, comprises the net income tax base. The amount of NOL incurred in a loss year is the amount by which allowable Massachusetts deductions for that year (including the dividends received deduction but not including the net operating loss deduction itself), exceed the corporation's gross income for the loss year. See M.G.L. c. 63, § 30.4.
If an eligible corporation has income in a subsequent taxable year the NOL deduction is allowed to reduce such income. The deduction is based on the corporation's Massachusetts apportionment percentage for the taxable year of the loss. The apportioned loss may be deducted from income apportioned to Massachusetts based on the corporation's current taxable year apportionment percentage. Unused NOL may be carried forward up to twenty years and may not be carried back.
The NOL deduction may be claimed by business corporations, including S corporations, that are required to determine the net income measure of the corporate excise under M.G.L. c. 63, § 39. Financial institutions are not eligible to claim the deduction. Further, losses incurred in taxable years for which a corporation is not subject to the Massachusetts corporate excise (for example, where the corporation does no business in Massachusetts) are not allowed to be carried forward.
The revenue lost as a result of the deduction constitutes a tax expenditure.
Note that there is a similar federal deduction for NOL under Internal Revenue Code (Code) § 172. Massachusetts does not adopt the federal deduction and instead allows the state- specific deduction described above.
Origin: IRC §172; M.G.L. c. 63, §30.5
Corporate Excise Tax
Deductions from Gross Income
2.203
Net Operating Loss (NOL) Carry-Forward
The net operating loss (NOL) deduction is a current year deduction available to certain corporate excise filers that have sustained losses in prior taxable years. The deduction is allowed against gross income when determining Massachusetts net income, which on an apportioned basis, comprises the net income tax base. The amount of NOL incurred in a loss year is the amount by which allowable Massachusetts deductions for that year (including the dividends received deduction but not including the net operating loss deduction itself), exceed the corporation's gross income for the loss year. See M.G.L. c. 63, § 30.4.<BR><BR>If an eligible corporation has income in a subsequent taxable year the NOL deduction is allowed to reduce such income. The deduction is based on the corporation's Massachusetts apportionment percentage for the taxable year of the loss. The apportioned loss may be deducted from income apportioned to Massachusetts based on the corporation's current taxable year apportionment percentage. Unused NOL may be carried forward up to twenty years and may not be carried back.<BR><BR>The NOL deduction may be claimed by business corporations, including S corporations, that are required to determine the net income measure of the corporate excise under M.G.L. c. 63, § 39. Financial institutions are not eligible to claim the deduction. Further, losses incurred in taxable years for which a corporation is not subject to the Massachusetts corporate excise (for example, where the corporation does no business in Massachusetts) are not allowed to be carried forward.<BR><BR>The revenue lost as a result of the deduction constitutes a tax expenditure.<BR><BR>Note that there is a similar federal deduction for NOL under Internal Revenue Code (Code) § 172. Massachusetts does not adopt the federal deduction and instead allows the state- specific deduction described above.
<a href="https://www.law.cornell.edu/uscode/text/26/172" target="_blank">IRC §172</a>; M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter63/Section30" target="_blank">c. 63, §30.5</a>
234.3
247.6
260.6
272.4
285.3
