How NOLs Work What qualifies as an NOL?
NOLs are calculated using certain business deductions and losses. Not all expenses and income are included—there are specific IRS and state rules. These rules are different for individuals (like sole proprietors, estates, and trusts) and corporations. Who can use an NOL? C corporations (including those in Minnesota), individuals (sole proprietors), and estates/trusts can use NOLs. Partnerships and S corporations do not claim NOLs on the business tax return; instead, losses may “pass through” to partners/shareholders, who may use them personally. Minnesota NOL Rules for C Corporations Deduction limits : • For tax years starting after December 31, 2017 and before January 1, 2024, your NOL deduction is limited to 80 percent of Minnesota taxable net income each year. • For tax years beginning on or after January 1, 2024, your NOL deduction is limited to 70 percent of Minnesota taxable net income each year, regardless of when the loss originated. No carrybacks: • Minnesota does not allow businesses to carry losses back to prior years. You may only carry losses forward, for up to 15 years. Multistate business rule: • If your corporation operates both inside and outside Minnesota, you must allocate the NOL using Minnesota’s apportionment formula.
43
Made with FlippingBook - Online Brochure Maker