(a) For
privilege periods ending before July 31, 2019, a New Jersey net operating loss,
as defined at
N.J.A.C.
18:7-5.15, for any privilege period ending
after June 30, 1984, becomes a net operating loss carryover. The net operating
loss carryover is carried to each of the succeeding privilege periods and is
reduced in each such succeeding privilege period by the amount of entire net
income before net operating loss deduction and before exclusions, and is
further reduced to zero seven privilege periods following the privilege period
of the loss, taking into account the normal or extended due date for filing the
return for the seventh privilege period succeeding the privilege period of the
loss. The net operating loss carryover may not be carried back to any privilege
period preceding the privilege period of the loss. For this purpose, privilege
period shall mean the accounting period covered by the taxpayer's return. In no
event may a net operating loss carryover be used for a net operating loss
deduction on the eighth return succeeding the loss privilege period.
Notwithstanding the foregoing, a net operating loss for any privilege period
ending after June 30, 2009, shall be permitted as a net operating loss
carryover to each of the 20-privilege periods following the privilege period of
the loss.
(b) The net operating
loss may only be carried over by the actual corporation that sustained the
loss. The net operating loss may, however, be carried over by the corporation
that sustained the loss and which is the surviving corporation of a statutory
merger. The net operating loss may not be carried over by a taxpayer that
changes its state of incorporation or is a part of a statutory consolidation.
Section 4(k) of the Act defines entire net income in terms of a specific
corporate franchise. See
N.J.S.A.
54:10A-4.5.
(c) Corporations acquired under I.R.C. §
338 do not lose their net operating loss carryover because the corporate
franchise remains unchanged to the extent it does not fall within the
provisions of
N.J.A.C.
18:7-5.14.
Example 1: A domestic corporation dissolves pursuant to laws
of the State of New Jersey and incorporates in another state. This newly formed
corporation of another state is a new legal entity for corporation business tax
purposes and the net operating loss carryover of the domestic corporation is
not available to the new entity.
Example 2: The example below illustrates the net operating
loss carryover for the full term of seven years and demonstrates the
application of net operating loss deductions in the proper sequence.
Click
here to view
(d)
The following explain and/or define the above table: Line 28 is the amount of
the taxpayer's taxable income, before net operating loss deduction and special
deductions that the taxpayer is required to report to the United States
Treasury Department for the purpose of computing its Federal income tax. New
Jersey Adjustments are the statutory additions and deductions to line 28 that
are peculiar to the New Jersey corporation business tax.
1. "ENI" means entire net income as defined
in the Act and in these rules.
2.
"NOL" means net operating loss.
i. Exclusions
are the exclusions from entire net income for dividends received and the
eligible net income of an international banking facility.
3. "IBF" means the eligible net income of an
international banking facility.
(e) For privilege periods ending on and after
July 31, 2019, see
N.J.A.C.
18:7-5.21.
Notes
N.J. Admin.
Code §
18:7-5.13
Amended by
49
N.J.R. 1694(a), effective
6/19/2017
Amended by
54
N.J.R. 1819(a), effective
9/19/2022
