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What is going on in California NOL suspension right now? Are they accruable but not usable? When is this expected to go away?

California NOL Suspension

What is going on in with Calif. N.O.L. Suspension 2012 right now? Are they accruable but not usable? When is this expected to go away?


John Advani
Title: Tax Partner
Company: Frank, Rimerman + Co. LLP
(Tax Partner, Frank, Rimerman + Co. LLP) |

California again suspended Net Operating Losses (NOLs) for 2010 and 2011 for certain taxpayers. This suspension is similar to the prior suspension for 2008 and 2009 with some differences. For 2008 and 2009, California disallowed usage of NOLs for taxpayers with California taxable income (after apportionment) of $500,000 or more. However, for 2008 and 2009 taxpayers were allowed to utilize income tax credits to offset up to 50% of their California income tax liability.

The NOL suspension for 2010 and 2011 has different restrictions than 2008 and 2009. For tax years starting after January 1, 2010 and January 1, 2011 utilization of California NOLs has been suspended for taxpayers with taxable income before apportionment of $300,000 or more. However, for 2010 and 2011, California tax credits (e.g. R&D credits) can be used to offset 100% of the California income tax liability. For any carryover of an NOL for which a deduction is denied by reason of the suspension in 2008, 2009, 2010 or 2011, the carryover period is extended.

Current California law allows NOLs to be utilized starting in 2012. However, it should be noted California announced the suspension of the 2008 and 2009 NOLs in late 2008. Similarly, in October 2010, California again announced suspension for 2010 and 2011. Therefore while it is expected the NOLs will be usable again for 2012, it is possible there may be a California NOL suspension 2012, suspending these as late as the end of 2012.

Dan McEntee
Title: Principal
Company: Monta Vista Finance
(Principal, Monta Vista Finance) |

Does anyone have an update on this situation for California NOL suspension 2012? Will California NOLs be usable in 2012?


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