California Extends its Suspension of NOL Deductions – But not the limits on Tax Credits
January 4, 2011
For tax years beginning in 2010 and 2011, the Net Operating Loss (NOL) Deductions continue to be suspended for corporate and individual taxpayers under AB 1452 for taxpayers with income of $500,000 or more. Taxpayers with less than $500,000 are exempt from the suspension.
It’s important to note that in previously years, California imposed a limitation on the use of income tax credits in addition to the NOL Deduction suspension. In tax years beginning in 2008 and 2009, taxpayers were only allowed to use credits to offset 50% of their net California tax liability. The previous 50% limitation with regards to the tax credits were not extended. As such, taxpayers with credits available will be able to use these credits to a greater extent in the 2010 and 2011 tax years.
Those taxpayers carrying over NOL that they cannot use should focus on generating tax credits do offset a larger portion of their California tax liability
