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ARIZONA HOUSE OF REPRESENTATIVESFifty-fifth Legislature First Regular Session |
Senate: FIN DPA 5-4-1-0 | 3rd Read 16-14-0-0 |
SB 1392: net operating loss; carryback; carryover
Sponsor: Senator Leach, LD 11
Committee on Ways & Means
Overview
Conforms Arizona tax law for the net operating loss (NOL) carryovers and carrybacks, for individual and corporate taxpayers, to the Internal Revenue Code (IRC).
History
Current law conforms Arizona's income tax calculation to the IRC of 1986, as amended, in effect on January 1, 2020, including those provisions that became effective during 2019 with the specific adoption of all retroactive effective dates. (A.R.S. § 43-105)
Generally, each year changes are made to the IRC that affect the Arizona income tax calculation. Tax conformity with the IRC is deemed necessary because the calculation of Arizona corporate income tax begins with federal taxable income. Additionally, federal adjusted gross income is the starting point for individual income tax.
Beginning January 1, 2018, the Tax Cut and Jobs Act limited the NOL deduction that may be used in a taxable yea to the lesser of the aggregate of the NOL carryovers plus the NOL carrybacks or 80% of taxable income. However, in 2020, the Coronavirus Aid, Relief and Economic Stimulus Act suspended this limitation for tax years 2018, 2019 and 2020.
Provisions
2. Requires, for taxable years beginning January 1, 2018, the amount of the NOL deduction that would have been disallowed under the IRC to be subtracted when computing an individual's Arizona gross income. (Sec. 2)
3. Requires, for taxable periods beginning January 1, 2021, an NOL to be an NOL carryover for each of the 20 succeeding taxable years to the extent not already excluded from Arizona gross income. (Sec. 2)
4. Requires the NOL to be an NOL carryback, to the extent not already excluded from an individual's Arizona gross income, for:
a) Each of the five taxable years preceding the Taxable year of the NOL, for NOLs arising in taxable periods between January 1, 2018, and December 31, 2020;
b) Each of the two taxable years preceding the taxable year of the NOL, for NOLs arising in taxable periods beginning January 1, 2021; or
c) The carryback in the case of the earliest of the taxable years to which the NOL may be carried must be the excess of the amount of the NOL over the sum of the taxable income for each of the prior taxable years to which the NOL may be carried computed by determining the amount of the NOL subtraction for each preceding taxable year, without regard to the NOL for the loss year or to the NOL for any succeeding taxable year. (Sec. 2)
5. Requires the NOL to be an NOL carryback, if for any taxable year a corporation has an NOL, for:
a) Each of the five taxable years preceding the taxable year of the NOL, for NOLs arising in taxable periods between January 1, 2018 and December 31, 2020; or
b) Each of the two taxable years preceding the taxable year of the NOL, for NOLs arising in taxable periods beginning January 1, 2021. (Sec. 3)
6. Requires the carryback in the case of the earliest of the taxable years to which the NOL may be carried must be the excess of the amount of the NOL over the sum of the taxable income for each of the prior taxable years to which the NOL may be carried computed by determining the amount of the NOL subtraction for each preceding taxable year, without regard to the NOL for the loss year or to the NOL for any succeeding taxable year. (Sec. 3)
7. Contains a retroactivity clause to January 1, 2018. (Sec. 4)
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11. SB 1392
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