BILL NUMBER: S7877
SPONSOR: GOUNARDES
 
TITLE OF BILL:
An act to amend the tax law, in relation to the application of net oper-
ating losses in the calculation of corporate franchise taxes
 
PURPOSE OR GENERAL IDEA OF BILL:
This bill would amend the tax law to reduce the net operating loss
carryback provision from three years to one year and the carryforward
amount from twenty years to five years
 
SUMMARY OF PROVISIONS:
Section one of the bill amends Clause 4 of subparagraph (ix) of para-
graph (a) of subdivision 1 of section 210 of the tax law to effectuate
changes to Net Operating Loss carryback and carryforward provisions
Section two of the bill provides for the effective date
 
JUSTIFICATION:
A net operating loss (NOL) occurs when a company's allowable deductions
exceed its taxable income within a tax period. If a company is taxed
during profitable periods without receiving any tax relief, such as a
refund, during periods of NOL, it results in an unbalanced tax burden.
NOLs can generally be used to offset a company's tax payments through an
IRS tax provision called a loss carryforward or carryback. The NOL
amount is the amount of loss in a current year that can be carried
forward to future years or, in certain instances, carried back to prior
years. Because the time value of money shows that present tax savings
are more valuable than those in the future, businesses almost always
prefer to use the carryback method first, followed by the carryforward
method.
Despite its elimination in 2017 at the federal level, New York State
offers an unlimited, three-year NOL carryback for corporate franchise
tax returns that businesses pay.
This bill makes a sensible adjustment to the Net Operating loss
provisions in the New York State Tax Code, by reducing the net operating
loss carryback provision from three years to one year and the carryfor-
ward amount from twenty years to five years.
 
PRIOR LEGISLATIVE HISTORY:
None
 
FISCAL IMPLICATIONS:
TBD
 
EFFECTIVE DATE:
This act shall take effect immediately

Statutes affected:
S7877: 210 tax law