What You Need to Know About Louisiana Net Operating Loss Changes

Tax Law and News Congress

The state of Louisiana has made a number of tax law changes in the last year, including changes made this summer by a special session of the state legislature. Many changes were effective on July 1, 2015, and required mid-year changes to the Intuit® ProConnect™ Lacerte® program. Further special legislation changes have been made in 2016, as the state tries to address revenue shortfalls. Among the areas affected is the use of net operating losses (NOLs) on Louisiana tax returns. These changes now affect both the 2015 and 2016 returns, with another change coming for 2017 tax returns.

In 2015, House Bill 218 eliminated the three-year NOL carryback, and increased the NOL carryover period from 15 years to 20 years. House Bill 624 reduced the amount of NOL that could be claimed on tax returns by 28 percent of the aggregate carryover amount. In other words, the Louisiana net income before loss adjustment is multiplied by 72 percent, before NOL carryover is applied against income. Any carryover loss remaining after that calculation is carried forward to future years. If the current year income is greater than loss carryover, the NOL amount is multiplied by 72 percent, before being applied against income. This change from HB 624 was to sunset after June 30, 2018, reverting to prior law after that time. The changes were effective July 1, 2015, and were incorporated in a mid-summer release of the Lacerte program for the Corporation and S Corporation modules.

This year, the state has made additional changes to the treatment of net operating losses. House Bill 20, signed into law on March 9 and effective on Jan. 1, 2016, makes the 72 percent usage of NOL’s permanent, so it will no longer revert to 100 percent usage in 2018. Beginning with the 2016 version of the Lacerte program, the 72 percent usage of NOL will be viewed as a permanent change, with no tracking of future usage of the disallowed amounts.

House Bill 116, signed on March 15, requires a reordering of the usage of NOL carryovers so that the most recent loss must be used first. This change will be effective on Jan. 1, 2017, and future versions of the Lacerte program will incorporate this change.