New York Codes, Rules and Regulations › Title 20 - DEPARTMENT OF TAXATION AND FINANCE › Chapter I - Franchise and Certain Business Taxes › Subchapter A - Business Corporation Franchise Tax › Part 3 - COMPUTATION OF TAX › Subpart 3-9 - NET OPERATING LOSS AND NET OPERATING LOSS DEDUCTIONS FOR TAXABLE YEARS BEGINNING ON OR AFTER JANUARY 1, 2015 › Section 3-9.7 - Examples

Current through Register Vol. 46, No. 28, July 10, 2024
The following examples assume that the corporation has
						(1) no PNOLC subtraction in the year and (2) at least the amount of computed
						NOLD required to be utilized is available for deduction. While some examples
						may highlight multiple rules contained in this Subpart, the introductory text
						of the example is intended to highlight the main rule highlighted in each such
						example.
Example 1:
This example is intended to highlight that New York
						investment capital losses must be added back in computing the business income
						base and any net operating loss (NOL).
Taxpayer has a Federal loss of ($500,000), which includes
						a ($40,000) New York investment capital loss that resulted from the sale of its
						investment capital. The taxpayer must adjust its Federal taxable income (FTI)
						to account for such loss when computing the business income base and its
						NOL.
Federal taxable income (loss)
($500,000)
Adjustment for New York investment capital
									 loss
$40,000
Federal taxable income (loss) adjusted for New
									 York investment capital loss
($460,000)
Example 2:
This example is intended to highlight that the NOLD
						required to be utilized is the amount that reduces the tax on the business
						income base to the higher of the capital base tax or the fixed dollar
						minimum.
Taxpayer X computes its 2020 NOLD of $6,730,769 required
						to be utilized as follows:
NOL Deduction Schedule
Apportioned total business income after the
									 PNOLC but before the NOLD
$7,500,000
Business income base tax rate
6.50%
Product of apportioned total business income
									 after the PNOLC but before the NOLD and the business income base tax
									 rate
$487,500
Capital base tax
$50,000
FDM
$20,000
Greater of capital base tax and FDM
$50,000
Difference between (a) product of apportioned
									 total business income after PNOLC but before the NOLD and the business income
									 base tax rate and (b) greater of capital base tax and FDM
$437,500
Business income base tax rate
6.50%
Net operating loss deduction required to be
									 utilized ($437,500/6.5%)
$6,730,769
Example 3:
This example is intended to highlight that the NOLD may
						offset income from investment capital that remains in business income due to
						the 8 percent of ENI limitation on gross investment income.
Taxpayer Y sustained an NOL in 2021 of ($3,750). It
						properly elected to waive the carryback period so the NOL is carried forward to
						2022. In 2022, the gross investment income limitation reduced the amount the
						taxpayer was allowed to deduct as investment income from $500 to $360 (8% of
						$4,500). As such, $140 of income from investment capital was considered
						business income in 2022.
NOL Schedule
2021
2022
Entire net income
($5,000)
$4,500
Investment income
$360
Total business income
($5,000)
$4,140
BAF
75%
85%
Apportioned total business income after the
									 PNOLC but before the NOLD
($3,750)
$3,519
Business income base tax rate
6.5%
Product of apportioned total business income
									 after the PNOLC but before the NOLD and the business income base tax
									 rate
$229
Capital base tax
$200
FDM
$75
Greater of capital base tax and FDM
$200
Difference between (a) product of apportioned
									 total business income after PNOLC but before the NOLD and the business income
									 base tax rate and (b) greater of capital base tax and FDM
$29
Business income base tax rate
6.5%
NOLD required to be utilized
$442
NOL carryforward from 2021 to be used in
									 2022
$442
----------->($442)
Balance of 2021 NOL available for carryforward
									 after the 2022 tax year
($3,308)
Example 4:
This example is intended to highlight how a separate
						filer carries back its NOL to previous years.
Company A, a calendar-year taxpayer, was incorporated and
						began doing business in New York as of 1/1/2019. Company A had New York income
						and losses as follows:
NOL Schedule
2019
2020
2021
2022
Apportioned total business income after the
									 PNOLC but before the NOLD
$7,500,000
$3,500,000
($10,000,000)
$2,000,000
Business income base tax rate
6.5%
6.5%
6.5%
Product of apportioned total business income
									 after PNOLC but before the NOLD and the business income base tax rate
$487,500
$227,500
$130,000
Capital base tax
$28,000
$25,000
$17,000
FDM
$50,000
$50,000
$50,000
Greater of capital base tax and FDM
$50,000
$50,000
$50,000
Difference between (a) product of apportioned
									 total business income after PNOLC but before the NOLD and the business income
									 base tax rate and (b) greater of capital base tax and FDM
$437,500
$177,500
$80,000
Business income base tax rate
6.5%
6.5%
6.5%
NOLD required to be utilized (if
									 available)
$6,730,769
$2,730,769
$1,230,769
NOL sustained
($10,000,000)
NOL carryback from 2021 to 2019
($6,730,769)
<---------------
$6,730,769
NOL carryback from 2021 to 2020
($2,730,769)
<----------$2,730,769
NOL carryforward from 2021 to 2022
$538,462
-------->($538,462)
Business income base
$769,231
$769,231
($10,000,000)
$1,461,538
Business income base tax
$50,000
$50,000
$0
$95,000
Example 5:
This example is intended to highlight how a combined
						group member computes its share of NOLs sustained in the loss year.
Taxpayers L, M, N & O began doing business and
						properly filed a combined report in New York in the 2021. As the combined group
						sustained an NOL, each member computes its share of the NOL as follows:
Computation of the NOL for
									 Members of a Combined Group
(1)
(2)
Combined Group
2021 Business Income/(Losses)
Business Loss by Member
Member's business losses as a % of total
									 business losses of all members with losses
Member's 2021 NOL (2021 Total BI*(1))
L
($750)
($750)
20.0%
($700)
M
($2,000)
($2,000)
53.3%
($1,867)
N
$250
$0
0.0%
$0
O
($1,000)
($1,000)
26.7%
($933)
Totals
($3,500)
($3,750)
100.00%
($3,500)
If taxpayers L, M, N, and O file a combined report in
						2022, the NOL carryforward available for use by the group would be $3,500.
						However, if taxpayers L,M, and N file a combined report in 2022, the group
						would have an NOL carryforward available for use by the group of $2,567 ($700 +
						$1,867) and taxpayer O would have an NOL carryforward available for use of $933
						on its separate return in 2022.
Example 6:
This example is intended to highlight how a combined
						group member computes its share of NOLs and how the share of such NOLs is
						carried back to previous years.
In taxable year 2020, Corporation A began doing business
						in New York and filed a separate New York State tax return. Corporations B and
						C also became subject to tax in taxable year 2020 and properly filed a combined
						report. In 2021, Corporation A was purchased by unrelated group that includes
						corporations B and C. The newly formed combined group A, B, and C properly
						files a combined New York State return and sustains an NOL in 2021. Each member
						of the combined group must compute its share of the NOL sustained in 2021 based
						on its share of the loss. Corporation A may carry back its share of the 2021
						loss to its separately filed 2020 return and Corporations B and C may carry
						back their share of 2021 losses to the 2020 combined report filed by combined
						group B and C.
NOL Schedule
A is an unrelated separate Filer
BC Group
ABC Group
Corporation
2020
2020
2021
A
$6,000,000
($1,750,000)
B
$1,250,000
($1,275,000)
C
$250,000
($1,300,000)
Apportioned total business income after the
									 PNOLC but before the NOLD
$6,000,000
$1,500,000
($4,325,000)
Business income base tax rate
6.50%
6.50%
Product of apportioned total business income
									 (loss) after the PNOLC but before the NOLD and the business income base tax
									 rate
$390,000
$97,500
Capital base tax
$45,000
$18,000
FDM
$20,000
$50,000
Greater of capital base tax and FDM
$45,000
$50,000
Difference between (a) product of apportioned
									 total business income after PNOLC but before the NOLD and the business income
									 base tax rate and (b) greater of capital base tax and FDM
$345,000
$47,500
Business income base tax rate
6.50%
6.50%
NOLD required to be utilized (if
									 available)
$5,307,692
$730,769
NOL APPLICATION
A is an unrelated separate Filer
BC Group
ABC Group
2020
2020
2021
Corporation
A
$6,000,000
($1,750,000)
B
$1,250,000
($1,275,000)
C
$250,000
($1,300,000)
Combined Apportioned Business Income after the
									 PNOLC but before the NOLD
$6,000,000
$1,500,000
($4,325,000)
Carryback A's NOLs from 2021 to 2020
($1,750,000)
<-----------------
$1,750,000
Carryback B's and C's NOLs from 2021 to
									 2020
($730,769)
<--------$730,769
Business income base
$4,250,000
$769,231
($4,325,000)
Balance of NOL sustained in 2021 after
									 carryback to 2020
($1,844,231)
Corporation A carried back its share of the 2021 loss of
						$1,750,000 to reduce its 2020 tax. As its carryback of $1,750,000 is less than
						the NOLD required to be utilized (if available), Corporation A completely
						exhausted its 2021 NOL. While Corporations B and C carried back a portion of
						the 2021 NOLs, the total NOL available for carryback of $2,575,000 is greater
						than the NOLD required to be utilized of $730,769. As such, Corporations B and
						C must determine their share of NOL carryback based on their share of losses in
						2021. Of the $730,769 carried back to 2020, Corporation B's share is $361,837
						(1,275,000/2,575,000 * $730,769) and Corporation C's share is $368,932
						(1,300,000/2,575,000 * $730,769). Corporation B's 2021 NOL carryforward is
						$913,163 ($1,275,000 - $361,837) and Corporation C's 2021 NOL carryforward is
						$931,068 ($1,300,000-$368,932).
Example 7:
This example is intended to highlight how NOLs are
						impacted by subsequent adjustments to the loss year as well as the time period
						for assessing deficiencies when an adjusted NOL is carried to other
						periods.
Corporation B sustains an NOL for the taxable year ending
						12/31/2018 and on 10/15/2019 files its first amended 2015 CT-3 form to
						carryback the NOL of $50,000 to its 2015 taxable year ($100,000 business loss
						multiplied by a BAF of 50%). Corporation B receives a refund of $3,550 for the
						2015 taxable year.
Based on a subsequent correction to the BAF by the
						taxpayer that changes its 2018 BAF from 50% to 80%, it is determined that the
						actual NOL for the taxable year ending 12/31/2018 was $80,000 ($100,000
						business loss multiplied by a BAF of 80%). Corporation B files a second amended
						report for the 2015 taxable year in July 2020 to claim the additional refund
						for 2015.
In December 2020, the IRS completes their examination of
						Corporation B and makes their final determination. The IRS required Corporation
						B to recognize in 2018 a deferred receipt from undelivered sales. Corporation B
						files a second amended 2018 report timely to report the correction to its 2018
						FTI and also amend its BAF since the Revenue Agent Report (RAR) directly
						impacted the 2018 BAF. As the RAR changed the 2018 NOLD, the Department
						calculates Corporation B's proper liability for the 2015 tax year upon
						receiving a copy of the RAR. As a result, Corporation B owes $1,207 for the
						2015 and the Department may assess a deficiency due by the authority granted
						under section 1083(c)(4).
2018
As Filed
First Amended
Second Amended
Total business income before RAR
($100,000)
($100,000)
($100,000)
Adjustment to federal taxable income due to
									 RAR
$10,000
Total business income after RAR
($100,000)
($100,000)
($90,000)
BAF
50%
80%
70%
Business income base
($50,000)
($80,000)
($63,000)
2015
Original
First Amended
Second Amended
Third Amended
Apportioned Business Income before NOLD
$300,000
$300,000
$300,000
$300,000
2018 NOL carryback to 2015
$0
($50,000)
($80,000)
($63,000)
2015 business income base
$300,000
$250,000
$220,000
$237,000
Business income tax base current year tax
									 rate
7.10%
7.10%
7.10%
7.10%
Business income base tax
$21,300
$17,750
$15,620
$16,827
Prepayments
$21,000
$21,300
$17,750
$15,620
Refund/Additional Tax*
$300
($3,550)
($2,130)
$1,207