Net operating loss carryforwards

Net operating loss carryforwards

Application of losses to offset earnings in future years.

Carryforward

In accounting, a way for a company to reduce its tax liability by applying losses to future tax years in which the company makes a profit. That is, carryforward allows companies to apply losses to profits that have not yet occurred and thereby reduce the taxes they pay on those profits. Carryforward is limited to seven years. For example, suppose a company loses $500,000 in year one, then nets $1,000,000 in year five. The company may carry forward the losses and only be liable for taxes on $500,000 of its profit in year five.

Independent contractors who file Schedule C with the IRS are required to use carryforwards, which is useful since most independent contractors lose money in their first few years of business. Some publicly-traded companies opt not to use it, as appearing to reduce profits may scare off potential investors who do not realize that the profits upon which taxes are paid do not equal the company's actual profits.
References in periodicals archive ?
Misonix also wrote down net operating loss carryforwards, which have a lower value due to lower taxes, which means it will take longer to use these tax benefits.
The Rights Plan is designed to protect the company's ability to use its valuable net operating loss carryforwards and certain other valuable tax attributes.
Tenet also expects to report a taxable loss on the sale of these assets of approximately USD 200m, which will increase the size of the company's federal net operating loss carryforwards by a corresponding amount.
Alaska Communications (NASDAQ: ALSK) has announced that its board of directors has approved the adoption of a tax benefits preservation plan (or "the plan") in the form of a Section 382 Rights Agreement designed to protect and preserve the long-term value of certain tax assets primarily associated with net operating loss carryforwards, the company said.
Rite Aid Corporation today announced that its Board of Directors has adopted a tax benefits preservation plan (the "Plan") designed to preserve Rite Aid's ability to utilize its net operating loss carryforwards and other tax attributes (collectively, "Tax Benefits").
is currently focused on investing in profitable operations to redeploy its working capital and maximise the use of its net operating loss carryforwards.
Zayo anticipates more than USD40 million in annual cost synergies to be realized throughout the integration process and will benefit from more than USD400 million in net operating loss carryforwards acquired in the transaction.
NASDAQ: PBIB) has said that its board of directors adopted a tax benefits preservation plan that will help preserve the value of certain of the company's deferred tax assets primarily associated with net operating loss carryforwards (NOLs) under the Internal Revenue Code.
The net benefit also included a $178,000 benefit related to the Company's ability to fully offset alternative minimum taxable income with alternative minimum net operating loss carryforwards that were generated in fiscal year 2008.
Finally, although the budget does not adopt the formal loss transfer system recommended by TEI, the budget legislation will expand the carryforward period for use of investment tax credits and net operating loss carryforwards.
Another potential adverse consequence of failing to file a return is being barred from claiming passive loss and net operating loss carryforwards in subsequent years.
Should the loss exceed that year's total income, then they should consult their tax adviser regarding the availability of net operating loss carryforwards and carrybacks," says Morris.
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