New Jersey Administrative Code › Title 18 - TREASURY - TAXATION › Chapter 7 - CORPORATION BUSINESS TAX ACT › Subchapter 5 - ENTIRE NET INCOME; DEFINITION, COMPONENTS AND RULES FOR COMPUTING › Section 18:7-5.13 - New Jersey net operating loss carryover

Current through Register Vol. 56, No. 14, July 15, 2024
(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.