Tax Help for Businesses: NOL Carryback Rules Extended

The big homebuilders are lining up for their tax refund, thanks to an expansion of stimulus legislation. Toll Brothers announced that it will be receiving a 2009 tax refund of $162 million. Lennar estimates a whopping $320 million anticipated tax refund!

But here’s the good news for your business — you don’t need to be a massive corporation with a powerful Washington DC lobby to get your own little bailout package! If your once flourishing business has taken a hit in 2008 and 2009, you might not need to see red anymore.

Last year, we discussed the the net operating loss carryback rules when they were available only to businesses with gross receipts under $15 million. The NOL income tax rules, allowing businesses with gross receipts under $15 million to “carry back” their losses up to 5 years, were set to expire on October 15, 2009.

Luckily for business owners, the rules have changed. On November 6, 2009, the income tax rules were extended under the Worker, Homeownership and Business Assistance Act of 2009.

The key changes in this legislation? Gross business receipts need not be limited to $15 million anymore.

Here’s another beautiful subtlety of the NOL carryback rules – due to a minor overlap of this legislation with the 2008 bailout legislation, Midwestern business owners who suffered a business loss due to disaster in 2008 (floods, storms, tornados) might be eligible to deduct losses under both laws.

While much of this sounds too good to be true, there are some bitter opponents. The National Bureau of Economic Research estimates that the price tag on the extension of these income tax rules would be upwards of $50 billion.

Essentially, opponents argue that this NOL carryback scheme is just a disguised bailout package for the homebuilding and automotive industries at the expense of the taxpayers.

And what if it is? Does that necessarily mean that small business owners will be hurt by this extension of the income tax rules regarding NOL carrybacks? Not really. In fact, small businesses stand to gain, too.

Despite the larger ideological antagonism to this legislation, small business owners should take note of these incentives and realize the benefit that these incentives could have on their pocketbooks. Denver businessman, Bill Hewitt, recently saw a refund check for $150,000 under the NOL income tax rules.

Now,that’s a large chunk of change — it’s money infused back into his business and certainly a stimulus for the economy.

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