In years beginning after December 31, 1954, net operating
losses shall be allowed or allowable for Iowa corporation income tax purposes
to the same extent they are allowed or allowable for federal corporation income
tax purposes for the same period, provided the following adjustments are
made:
(1)
Additions to
income.
a. Refunds of federal income
taxes due to net operating loss and credit carrybacks shall be reflected in the
following manner:
(1) Accrual basis taxpayers
shall accrue refunds of federal income taxes to the year in which the net
operating loss or excess credit occurs. The federal refund shall still accrue
for tax periods beginning on or after January 1, 2009, even though the Iowa net
operating loss carryback is not allowed.
(2) Cash basis taxpayers shall reflect
refunds of federal income taxes in the return for the year in which the refunds
are received. The federal refund due to any net operating loss carryback for
federal income tax purposes for tax years beginning on or after January 1,
2009, must still be reflected even though the Iowa net operating loss carryback
is not allowed.
b. Iowa
income tax deducted on the federal return for the loss year shall be reflected
as an addition to income in the year of the loss.
c. Interest and dividends received in the
year of the loss on federally tax-exempt securities shall be reflected as
additions to income in the year of the loss.
(2)
Reductions of income.
a. Federal income tax paid or accrued during
the year of the net operating loss shall be reflected to the extent allowed by
law as an additional deduction in the year of the loss.
b. Iowa income tax refunds reported as income
for federal return purposes in the loss year shall be reflected as reductions
of income in the year of the loss.
c. Interest and dividends received from
federal securities during the loss year shall be reflected in the year of the
loss as a reduction of income.
(3) If a corporation does business both
within and without Iowa, it shall make adjustments reflecting the apportionment
and allocation of its operating loss on the basis of business done within and
without the state of Iowa after completing the provisions of subrules 502.2(1)
and 502.2(2).
a. After making the adjustments
to federal taxable income as provided in 502.2(1) and 502.2(2), the total net
allocable income or loss shall be added to or deducted from, as the case may
be, the net federal income or loss as adjusted for Iowa tax purposes. The
resulting income or loss so determined shall be subject to apportionment as
provided in rules
701-503.5 (422),
701-503.6 (422) and
701-503.7 (422). The apportioned
income or loss shall be added or deducted, as the case may be, to the amount of
net allocable income or loss properly attributable to Iowa. This amount is the
taxable income or net operating loss attributable to Iowa for that
year.
b. The net operating loss
attributable to Iowa, as determined in rule
701-502.2 (422), shall be
subject to a 3-year carryback and a 15-year carryover provision for tax years
beginning prior to August 6, 1997. This loss shall be carried back or over to
the applicable year as a reduction or part of a reduction of the net income
attributable to Iowa for that year. However, an Iowa net operating loss shall
not be carried back to a year in which the taxpayer was not doing business in
Iowa. If the election under Section
172(b)(3) of the Internal
Revenue Code is made, the Iowa net operating loss shall be carried forward 15
taxable years. A copy of the federal election made under Section
172(b)(3) of the Internal
Revenue Code must be attached to the Iowa corporation income tax return filed
with the department.
c. For tax
years beginning after August 5, 1997, but before January 1, 2009, a net
operating loss attributable to Iowa, as determined in rule
701-502.2 (422), incurred in a
presidentially declared disaster area by a corporation engaged in a small
business or in the trade or business of farming must be carried back 3 taxable
years and carried forward 20 taxable years. All other net operating losses
attributable to Iowa must be carried back 2 taxable years and carried forward
20 taxable years. This loss shall be carried back or over to the applicable
year as a reduction or part of a reduction of the net income attributable to
Iowa for that year. However, an Iowa net operating loss shall not be carried
back to a year in which the taxpayer was not doing business in Iowa. If the
election under Section
172(b)(3) of the Internal
Revenue Code is made, the Iowa net operating loss shall be carried forward 20
taxable years. A copy of the federal election made under Section
172(b)(3) of the Internal
Revenue Code must be attached to the Iowa corporation income tax return filed
with the department.
d. For tax
years beginning on or after January 1, 1998, but before January 1, 2009, for a
taxpayer who is engaged in the trade or business of farming as defined in
Section
263A(e)(4) of the Internal
Revenue Code and has a loss from farming as defined in Section
172(b)(1)(F) of the
Internal Revenue Code including modifications prescribed by rule by the
director, the Iowa loss from the trade or business of farming is a net
operating loss which may be carried back five taxable years prior to the
taxable year of the loss. However, if a taxpayer has a net operating loss from
the trade or business of farming for a taxable year beginning in 1998 or for a
taxable year after 1998 and makes a valid election for federal income tax
purposes to carry back the net operating loss two years, or three years if the
loss was in a presidentially declared disaster area or related to a casualty or
theft loss, the net operating loss must be carried back two years or three
years for Iowa income tax purposes. A copy of the federal election made under
Section
172(i)(3) of the Internal
Revenue Code for the two-year or three-year carryback in lieu of the five-year
carryback must be attached to the Iowa return or the Form IA 1139 Application
for Refund Due to the Carryback of Corporate Farming Losses, to show why the
carryback was two years or three years instead of five years. However, an Iowa
net operating loss shall not be carried back to a year in which the taxpayer
was not doing business in Iowa.
When the taxpayer carries on more than one trade or business
within a corporate shell or files a consolidated Iowa corporation income tax
return, the income or loss from each trade or business must be combined to
determine the amount of net operating loss that exists and whether it is a net
operating loss from the trade or business of farming.
EXAMPLE 1. The taxpayer carries on the trade or business of
farming and also the trade or business of trucking for entities outside the
corporate shell. For the tax year, the taxpayer had a net operating loss from
farming of $25,000 and net income from trucking of $10,000 for a net operating
loss for the year of $15,000 which is a net operating loss from the trade or
business of farming which may be carried back 5 tax years and forward 20 tax
years.
EXAMPLE 2. The taxpayer carries on the trade or business of
farming and the trade or business of construction. For the tax year, the
taxpayer had income from farming of $12,000 and a net operating loss from
construction of $45,000 for a net operating loss for the year of $33,000 which
is a net operating loss from the trade or business of construction which may be
carried back 2 tax years and forward 20 tax years.
EXAMPLE 3. The taxpayer carries on the trade or business of
farming and the trade or business of construction. During the tax year, the
taxpayer had a net operating loss of $18,000 from farming and a net operating
loss of $9,000 from construction for a total net operating loss of $27,000. Of
this net operating loss, $18,000 is from farming and may be carried back 5
years and forward 20 years and $9,000 is from construction and may be carried
back 2 years and forward 20 years.
e. For tax years beginning on or after
January 1, 2009, a net operating loss attributable to Iowa, as determined in
rule
701-502.2 (422), shall be
carried forward 20 taxable years. The net operating loss cannot be carried back
to a previous tax year. The federal refund due to any carryback of a federal
net operating loss must still be included in income as provided in paragraph
502.2(1)
"a."
(6) The carryover
of Iowa net operating losses after reorganizations or mergers is limited to the
same extent as the carryover of a net operating loss is limited under the
provisions of Sections
381 through
386 of the Internal Revenue Code and
regulations thereunder or any other section of the Internal Revenue Code or
regulations thereunder. Where the taxpayer files as a part of a consolidated
income tax return for federal income tax purposes, but a separate return for
Iowa income tax purposes, the limitation on an Iowa net operating loss
carryover must be determined as though a separate income tax return was filed
for federal income tax purposes.
