2023 Laws of Puerto Rico › TITLE THIRTEEN - Taxation and Finance (§§ 1 — 33423) › Subtitle 17 - Internal Revenue Code of 2011 (§§ 30001 — 33423) › PART II - Income Taxes (§§ 30041 — 30622) › Chapter 1005 - Computation of Taxable Income (§§ 30101 — 30157) › Subchapter C - Deductions (§§ 30121 — 30140) › § 30134 - Net operating loss deduction

(a) Definition of net operating loss.— As used in this section, the term “net operating loss” means the excess of the deductions and exemptions allowed by this part over gross income, with the exemptions, additions, and limitations specified in subsection (d). In the case of taxpayer other than a corporation or partnership, the term “net operating loss” means the excess of the deductions of the taxpayer’s trade or business, as such term is defined in § 30121(b) of this title, allowed by this part on the gross income of such trade or business, with the exemptions, additions, and limitations specified in subsection (d).
(b) Amount of carryovers.—
(1) Net operating loss carryovers.—
(A) If for any taxable year beginning before January 1, 2005, the taxpayer has a net operating loss, the same shall be a net operating loss to be carried over to each of the following seven (7) taxable years.
(B) In the case of net operating losses incurred in taxable years beginning after December 31, 2004, and before January 1, 2013, the carryover period shall be twelve (12) years.
(C) In the case of net operating losses incurred in taxable years beginning after December 31, 2012, the carryover period shall be ten (10) years.
(D) The amount to be carried over to each one of said following taxable years shall be the excess, if any, of the amount of such net operating loss over the sum of the net income for each of the taxable years involved, provided, that for taxable years beginning after December 31, 2012, and before January 1, 2015, it shall be ninety percent (90%) of the net income and for taxable years beginning after December 31, 2014, it shall be eighty percent (80%) of the net income, computing such net income:
(i) With the exceptions, additions and limitations provided in clauses (1), (3), (5), and (6) of subsection (d); and
(ii) ninety percent (90%) of the net income for taxable years after December 31, 2012, involved, computing such net income:
(2) Subject to the provisions of clause (3),
(A) A transferee that acquires all or substantially all the property of a transferor on an exchange described in clause (4), (6), or (8) of subsection (b) of § 30144 of this title, may claim the deduction provided in clause (1) for the taxable years of the transferee ending after said exchange with respect to:
(i) Net operating losses incurred by the transferor during taxable years ending not later than such exchange and otherwise available under clause (1). Provided, however, That the amount of the net operating loss of the transferor that qualifies under clause (1) as a net operating loss carryover to a taxable year of the transferee shall be an amount equal to the net income for such year derived from the same commercial activity or trade or business that generated the losses.
(ii) Net operating losses of the transferee for taxable years ending not later than such exchange.
(B) The amount of said losses may be claimed as a deduction only against net income derived from any commercial activity or trade or business of the transferee, other than the commercial activity or trade or business acquired from the transferor in the exchange.
(C) The provisions of this clause that limit the amount of the net operating losses of a transferor or transferee that may be carried over by the transferee shall not apply to net operating losses of a transferor or transferee when the transferee acquires the transferor in an exchange described in § 30144(b)(4) of this title in connection with a reorganization described in § 30144(g)(1)(F) of this title.
(3)
(A) If:
(i) Fifty percent (50%) or more of the value of the stock of a corporation or interest in a partnership capital as of the close of the taxable year in which the net operating loss is incurred has been sold, exchanged, or otherwise transferred after such taxable year, or
(ii) one or more persons acquire fifty percent (50%) or more of the value of the stock or capital interest in a corporation or partnership, or of a corporation or partnership that is a party to a reorganization, after a taxable year in which a net operating loss is incurred, then the amount of said net operating loss that shall qualify as a net operating loss to be carried over to any taxable year of such corporation or partnership under clause (1) shall be an amount equal to the net income in the carryover year derived from the same commercial activity or trade or business that generated the net operating loss.
(B) The provisions of this clause shall not apply to those sales, exchanges, transfers, or acquisitions of stock or shares of a corporation or partnership if immediately after such transactions the transferor or transferors who owned fifty percent (50%) or more of the value of the stock or shares of such corporation or partnership on the date of such sales, exchanges, transfers, or acquisition also own fifty percent (50%) or more of the value of the acquirer of such stock or shares.
(4) For rules related to net operating losses carryovers after certain transactions described in § 30144(b)(5) and (g) of this title, see § 30144(t)(3)(A) of this title. The provisions of clauses (2) and (3) of this subsection shall not apply to a net operating loss subject to § 30144(t)(3)(A) of this title.
(5) For rules related to net operating losses carryovers after certain changes of control, see § 30144(u) of this title.
(c) Amount of net operating loss deduction.— The amount of the net operating loss deduction shall be the sum of the net operating loss carried over to the taxable year reduced by the amount, if any, by which the net income computed with the exceptions and limitations provided in clauses (1), (2), (3), (5) and (6) of subsection (d) exceeds, in the case of a taxpayer other than a corporation, the net income computed without such deduction or, in the case of a corporation, the net income subject to normal tax computed without said deduction.
In the case of a taxpayer filing as a corporation, the net operating loss deduction (computed as provided in the above paragraph) shall not exceed: (1) ninety percent (90%) of the net income subject to normal tax for taxable years beginning after December 31, 2012, but before January 1, 2015; and (2) eighty percent (80%) of the net income, for taxable years beginning after December 31, 2014.
(d) Exceptions, additions, and limitations.— The exceptions, additions, and limitations referred to in subsections (a), (b) and (c) shall be as follows:
(1) In computing gross income, there shall be included the amount of interest received that would be fully exempt from the taxes imposed by this part, decreased by the amount of interest paid or accrued which is not allowed as a deduction by § 30123, § 30137(a)(10), or § 30137(f) of this title, related to interest on debt incurred or continued to purchase or carry certain tax-exempt obligations, and decreased by the items described in § 30123(a)(5) of this title, related to expenses attributable to tax-exempt interest.
(2) No net operating loss deduction shall be allowed.
(3) The amount deductible on account of losses from sales or exchanges of capital assets shall not exceed the amount includible on account of gains from said sales or exchanges.
(4) Deductions otherwise allowed by this subtitle not attributable to the operation of a principal trade or business of the taxpayer, other than a corporation, shall be allowed only to the extent of the amount of the gross income not derived from such principal trade or business. For purposes of this clause, deductions and gross income shall be computed with the exceptions, additions, and limitations specified in clauses (1), (2), (3), and (5) of this subsection.
(5) The compensation received or accrued by reason of the rendering of personal services as an employee, or pension for services rendered, shall be excluded from the computation of gross income and net income for purposes of this section and shall not reduce the amount of the net operating loss for the year, nor the amount of the net operating loss to be carried over.
(e) The Secretary shall prescribe regulations for the implementation of this section. The regulations shall include a definition of the term “commercial activity or trade or business” for purposes of clauses (2) and (3) of subsection (b).
History —Jan. 31, 2011, No. 1, § 1033.14, retroactive to Jan. 1, 2011; Dec. 10, 2011, No. 232, § 33; June 30, 2013, No. 40, § 17; Sept. 30, 2015, No. 159, § 3.