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 ?
Second quarter 2019 net income was driven by $28.0 million in proceeds from the sale of real estate previously used as the Company's headquarters, resulting in a pretax gain of $25.9 million which for tax purposes is fully offset by net operating loss carryforwards.
Based on the amended merger agreement and assuming no redemptions, the combined company will have an initial enterprise value of approximately USD 1,037 million, based on approximately 69.0 million fully diluted shares of common stock outstanding at USD 10.00, estimated net debt of approximately USD 405 million and an adjustment for certain net operating loss carryforwards.
Schmitt Industries announced that the Company's Board of Directors has adopted a stockholder rights plan in an effort to protect its net operating loss carryforwards under Section 382 of the Internal Revenue Code.
The utility benefits from constructive regulation and cash savings from operating and maintenance (O&M) expense reductions and net operating loss carryforwards (NOLs) at parent CMS Energy Corporation (CMS), which will be used to help fund growth capex.
As Alaska Communications previously disclosed, on January 8, 2018, its Board adopted the tax benefits preservation plan to preserve the federal net operating loss carryforwards (NOLs) that Alaska Communications has generated from historical tax losses from being limited by the application of Section 382 of the US Internal Revenue Code.
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.
Rite Aid has federal net operating loss carryforwards totaling approximately $2.7 billion as of Dec.
382(h)(4), which the CCA quotes, states that the amount of any RBIL that "exceeds the section 382 limitation for any post-change year must be carried forward (not carried back) under rules similar to the rules applicable to net operating loss carryforwards and will be subject to the special limitations in the same manner as a pre-change loss" (emphasis added).
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.
Results of the fiscal 2008 quarter, meanwhile, reflected an $894.9 million, or $1.12 per share, noncash income tax charge from the recording of a valuation allowance against deferred tax assets (primarily net operating loss carryforwards).
The tax benefit arose from the utilization of net operating loss carryforwards and various other items.
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.