(a) No net
operating loss shall be carried back to any taxable year ending prior to
January 1, 1967, as provided by section
235-7(d)(2),
HRS.
(b) In computing the net
operating loss to be carried back or carried over, there shall be included in
gross income the amount of interest which is excluded from gross income by
section
235-7(a),
HRS, decreased by the amount of interest paid or accrued which is disallowed as
a deduction by section
235-7(e),
HRS.
(c) A net operating loss
carryback shall be limited to three taxable years preceding the taxable year of
such loss.
(d) A net operating loss
carryover shall be limited to fifteen taxable years following the taxable year
of such loss.
(e) In computing the
net operating loss, deductions shall be allowed only to the extent they are
connected with and allocable to income taxable in this State under section
235-5,
HRS, and section 265 (with respect to expenses and interest relating to
tax-exempt income), IRC, as operative under chapter 235, HRS.
(f) A taxpayer's election under section
172(b)(3)(C) (with respect to election to waive carryback), IRC, as operative
under chapter 235, HRS, does not extend the net operating loss carryover period
beyond fifteen taxable years following the taxable year of such loss.
No taxpayer shall make such an election as to a net
operating loss of a business where the net operating loss occurred in the
taxpayer's business prior to the taxpayer entering business in this State. The
election is made by attaching a statement to that effect to the taxpayer's
return (or amended return) for the taxable year of the loss, and must be made
no later than the due date of the return (including extensions) for that
year.
(g) A refund of
Hawaii income tax resulting from a net operating loss carryback is properly
included in the gross income of a taxpayer using the accrual method of
accounting for the taxable year of the loss which gives rise to the
refund.
(h) A deficiency
attributable to the application to the taxpayer of a net operating loss
carryback may be assessed at any time before the expiration of the period
within which a deficiency may be assessed for the taxable year of the net
operating loss which results in the carryback.
(i) For rules governing when a claim for
credit or refund attributable to a net operating loss carryback may be filed,
see section
235-111(d),
HRS, and section
18-235-111(a)(2).
(j) For corporations that have elected or are
electing under subchapter S, IRC, as operative under chapter 235, HRS:
(1) No carryforward, and no carryback,
arising for a taxable year for which a corporation is a C corporation may be
carried to a taxable year for which the corporation is an S corporation, except
as provided in section
235-125.5,
HRS.
(2) No carryforward, and no
carryback, shall arise at the corporate level for a taxable year for which the
corporation is an S corporation, pursuant to section
235-7(d)(3),
HRS, and section 1371(b)(2), IRC.
(3) Nothing in paragraph (1) or (2) shall
prevent treating a taxable year for which the corporation is an S corporation
as a taxable year for purposes of subsections (c) and (d).
