Minority of States Still Granting Net Operating Loss “Carryback” Deductions Should Eliminate Them Now
[i] John C. Healy and Michael S. Schadewald, 2009 Multistate Corporate Tax Guide on CD-ROM, CCH, validated with selective review of state corporate income tax statutes.
[ii] In Michigan and Ohio, the operating loss carryback provision applies only to individual income taxes.
[iii] That is not to say, however, that granting carrybacks or lengthening the carryback period is justified as a means of stimulating state or federal economic growth. At the state level, the loss of revenue from granting or extending carrybacks requires offsetting cuts in state spending or tax increases that reduce economic demand to the same extent, providing no net boost to economic growth. At the federal level, refunding additional income to corporations during a recession is unlikely to boost their investment significantly since the major roadblock to such investment is likely to be insufficient demand for their products. See: Aviva Aron-Dine, “Net Operating Loss Measure Under Consideration in Senate Has Low Bang-for-the-Buck as Stimulus: No Justification for Waiving PAYGO for the Provision,” Center on Budget and Policy Priorities, February 26, 2008.
[iv] Five states do not have corporate or personal income taxes for which NOL carrybacks are relevant. They are Nevada, South Dakota, Texas, Washington, and Wyoming.