CFO magazine reports that the new law allows companies to increase their net operating loss (NOL) from 2 years to 5 for losses incurred in 2008 and 2009. There are big implications here for Q1 earnings reports in 2010.
"The expansion of the NOL carryback period will accelerate a $33 billion refund of previously paid taxes for much of Corporate America in a very short period of time," says John McMahon, director for business tax services at Ernst & Young.
The only companies banned from taking advantage of the new law are those that accepted government bailout money, says tax expert Robert Willens, who heads an eponymous consultancy in New York. Willens explains that the five-year NOL carryback doesn't apply to corporations that allowed the government to buy company stock or warrants in exchange for cash as part of the Troubled Asset Relief Program — even if the company has since repaid the funds.