Net operating loss carrybacks


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Net operating loss carrybacks

The application of losses to offset earnings in previous years.

Carryback

In accounting, a way for a company to reduce its tax liability by applying a net operating loss to previous years in which it made a profit. If a company deducts more than its net income in a given tax year, it may take the difference between the deduction and the net income (a negative number) and apply it as a deduction on taxable income for the previous five years. For example, if a company makes $1,000,000 in one year, and loses $500,000 the following year, it may only be liable for a $500,000 profit on the year it makes a profit. That is, it may receive a tax refund on part of what it paid for the profitable year. See also: Future Income Tax.
References in periodicals archive ?
For 1990 and 1991, C realized operating losses, which B deducted (through net operating loss carrybacks and carryovers).
Even worse, the income tax net operating loss carrybacks require states to refund taxes paid in years preceding economic downturns.
Other established collateral agreements require the taxpayer to{l)reduce the basis of assets for purposes of computing depreciation and gain or loss on disposition, (2)waive net operating loss carrybacks and carryforwards and (3)waive bad debt losses or other deductions.
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