Hawaii Administrative Rules › Title 18 - DEPARTMENT OF TAXATION › Chapter 235 - INCOME TAX LAW › Subchapter 1 - GENERAL PROVISIONS › Section 18-235-7-15 - Net operating loss deduction

Current through June, 2024
(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).