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 18:7-5.17 - Suspension of net operating loss carryover

Current through Register Vol. 56, No. 14, July 15, 2024
(a) Except as provided
				below, for privilege periods beginning during calendar year 2002 and calendar year
				2003, no deduction for any net operating loss shall be allowed. If and only to the
				extent that any net operating loss carryover deduction is disallowed by reason of
				this subsection, the date on which the amount of the disallowed net operating loss
				carryover deduction would otherwise expire shall be extended by two years. This
				section shall not restrict the surrender or acquisition of corporation business tax
				benefit certificates pursuant to
				N.J.S.A.
				34:1B-7.42a and shall not restrict the application
				of corporation business tax certificates pursuant to N.J.S.A. 54:10A:4-2.
Example 1:
Minnow, Inc. is a calendar year taxpayer. In 2000, it filed a NJ
				  CBT-100 that reported a $ 1,000,000 net operating loss. In 2001, the taxpayer had
				  the following income:
Operating Income
$ 100,000
Dividends from wholly owned subsidiary
$ 50,000
Subtotal
$ 150,000
In 2001, Minnow, Inc., uses an NOL deduction of $ 150,000 thus
				  decreasing its prior year NOL to $ 850,000. It does not use any dividend received
				  deduction (DRD) in 2001.
The Business Tax Reform Act suspended the NOL deduction in tax
				  years 2002 and 2003. Assuming the same facts set forth above, in filing its return
				  after the law changes the use of the taxpayer's NOL deduction is suspended.
In 2003, Minnow, Inc. would use a DRD of $ 50,000 and pay taxes on
				  Entire Net Income of $ 100,000. The company would continue to have an NOL carryover
				  of $ 1,000,000 that it could potentially use in 2004.
Example 2:
Striper, Inc. is a calendar year taxpayer. In 2001, it filed a NJ
				  CBT return reporting a $ 1,000,000 net operating loss. In 2002, Striper, Inc.
				  reported the following items:
Operating Loss
($ 100,000)
Dividends from wholly owned subsidiary
$ 40,000
In 2002, as it would have done before the law change, the
				  taxpayer offsets $ 40,000 of current year loss against the dividend received
				  deduction. The taxpayer secures an additional NOL of $ 60,000 that will be available
				  in 2004.
Example 3:
In 2001, a taxpayer purchased tax benefits in the Tax Benefit
				  Certificate Program but did not use them in 2001. They can be used in 2002.
Example 4:
In 2002, a taxpayer purchased tax benefits in the Tax Benefit
				  Certificate Program. They can be used in 2002 notwithstanding the general suspension
				  of NOL deductions in 2002 and 2003. Tax Benefit Certificates can be both acquired
				  and applied during the NOL suspension period.
(b) For privilege periods beginning during
				calendar year 2004 and calendar year 2005, there shall be allowed as a deduction for
				the privilege period so much of the net operating loss carryover as reduces entire
				net income otherwise calculated by 50 percent. If and only to the extent that any
				net operating loss carryover deduction is disallowed by reason of this section, the
				date on which the amount of the disallowed net operating loss carryover deduction
				would otherwise expire shall be extended by a period equal to the period for which
				application of the net operating loss was disallowed by this section.
(c) Any net operating deduction that was
				disallowed by the prohibition, and would have expired in return periods beginning in
				2002 and 2003 is extended for two years. Any net operating loss deduction that was
				disallowed by the prohibition, and would have expired in return periods beginning in
				2004 and 2005, is extended for one return period for each return period that it was
				disallowed.