NE 99-09-4 Individual, Fiduciary, and Corporate Income Tax 2009-07-14

Does Nebraska follow the federal ARRA 2009 extended NOL carryback election for 2008 losses, for individual, fiduciary, and corporate taxpayers?

Short answer: Individual and fiduciary filers follow the federal extended carryback; corporate filers do not. The American Recovery and Reinvestment Act of 2009 let eligible small businesses elect a three-, four-, or five-year carryback period for certain 2008 net operating losses (NOLs). Revenue Ruling 99-09-4 concludes that Nebraska follows that election for losses claimed by individual taxpayers (including losses from pass-through entities) and on fiduciary returns -- they use the same carryback period for Nebraska -- because Neb. Rev. Stat. § 77-2716(2) ties an individual's state NOL to the laws of the United States. Corporate taxpayers cannot: under Neb. Rev. Stat. § 77-2734.07, a Nebraska corporate NOL may only be carried forward (five years), so the federal carryback change does not apply. Affected individuals/fiduciaries must first file a 2008 Nebraska return and Form NOL, then attach federal carryback documentation (Form 1045, 1040X, etc.) to the amended Nebraska return.

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This page answers the general question as of 2009. Ezel answers yours, under current Nebraska tax law, with citations.

Disclaimer: This is an official Revenue Ruling of the Nebraska Department of Revenue, a guidance document stating the Department's interpretation of how Nebraska tax law applies. Each Nebraska guidance document carries the notice that it 'is advisory in nature but is binding on the Nebraska Department of Revenue until amended.' Unlike a private letter ruling, a Revenue Ruling is a general statement of Department policy rather than advice to a single taxpayer, but it can be amended, superseded, or made obsolete by a later ruling or a change in statute or regulation, many rulings in this series have been rescinded or superseded, so confirm it is still in effect before relying on it. Nebraska's local option sales and use taxes are administered by the Department, not self-collected by home-rule cities. This summary is informational only and is not legal or tax advice. Consult a licensed Nebraska tax professional about your situation.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

A net operating loss (NOL) is a business loss that exceeds income for the year. Federal law sometimes lets you "carry back" an NOL to earlier years to get a refund of taxes already paid. The American Recovery and Reinvestment Act of 2009 (ARRA) temporarily let eligible small businesses elect a three-, four-, or five-year carryback for certain 2008 NOLs. This ruling answers whether Nebraska goes along with that election.

The answer depends on the type of taxpayer:

Individuals (including pass-through losses) and fiduciaries (estates and trusts): yes. If you federally elect an extended carryback for a 2008 NOL, you use the same carryback period for Nebraska. The reason: Neb. Rev. Stat. § 77-2716(2) allows an individual's state NOL "consistent with … the laws of the United States," so when the federal carryback period is extended by the taxpayer's election, the Nebraska period is extended the same way.
Corporations: no. Neb. Rev. Stat. § 77-2734.07 lets a corporate taxpayer only carry an NOL forward, for each of the five taxable years after the loss year. There is no corporate carryback in Nebraska, so the federal change does not apply.

How an individual or fiduciary claims it. You must have already filed a 2008 Nebraska Individual or Fiduciary Income Tax Return and a Form NOL (Nebraska Net Operating Loss Worksheet) to establish the Nebraska NOL. Then file an amended Nebraska return carrying the loss back, and attach a copy of your federal carryback documentation -- Federal Form 1045, 1040X, or another return/document showing you elected the extended carryback for eligible small business losses. If the 2008 return was filed without the Form NOL, attach the Form NOL to the amended return.

What this means for you

Individual and fiduciary filers with a 2008 small-business NOL

If you elected an extended (3-, 4-, or 5-year) federal carryback for a 2008 NOL, apply the same period for Nebraska. First establish the Nebraska NOL on a 2008 return with Form NOL, then file the amended Nebraska return with your federal carryback documentation attached.

Corporate filers

You cannot use the extended carryback for Nebraska. A Nebraska corporate NOL is carried forward only, up to five years after the loss year. The ARRA carryback election does not change that.

Common questions

Q: Who can use the extended NOL carryback for Nebraska?
A: Individual taxpayers (including those with pass-through losses) and fiduciary (estate/trust) filers who federally elected the ARRA 2009 extended carryback for a 2008 NOL.

Q: Why are corporations treated differently?
A: Neb. Rev. Stat. § 77-2734.07 allows corporate NOLs to be carried forward only (five years). Nebraska provides no corporate carryback, so the federal carryback change does not apply.

Q: What do I attach to claim it?
A: A copy of your Federal Form 1045, 1040X, or other documentation showing the extended carryback election. You must also have filed a 2008 Nebraska return and Form NOL to establish the Nebraska NOL before filing the amended carryback return.

Citations and references

Neb. Rev. Stat. § 77-2716(2) -- allows state NOLs of individual taxpayers consistent with the laws of the United States, so an extended federal carryback election extends the Nebraska period the same way.
Neb. Rev. Stat. § 77-2734.07 -- limits corporate NOLs to a carryforward for each of the five taxable years after the loss year (no corporate carryback).
American Recovery and Reinvestment Act of 2009 -- the federal law giving eligible small businesses the three-, four-, or five-year carryback election for certain 2008 NOLs.
Form NOL (Nebraska Net Operating Loss Worksheet) and Federal Form 1045 / 1040X -- the documents used to establish and support the carryback.

Source

Original ruling text

Revenue Ruling 99-09-4
Individual, Fiduciary, and Corporate Income Tax

July 14, 2009

NEBRASKA FOLLOWS FEDERAL NET OPERATING LOSS (NOL) CARRYBACK PERIODS
FOR INDIVIDUAL OR FIDUCIARY, BUT NOT FOR CORPORATE TAXPAYERS
Issue:
The recent federal American Recovery and Reinvestment Act of 2009 provides that eligible small businesses
can elect a three, four, or five-year carryback period for certain 2008 NOLs. Will Nebraska follow these
federal changes?
Conclusion:
Yes, but only in the case of losses claimed by individual taxpayers or on fiduciary tax returns. Individual
small business taxpayers (including those with losses from pass-through entities) who federally elect an
extended carryback period for a 2008 tax year NOL are to use the same carryback period for Nebraska
income tax filing purposes. Corporate taxpayers, however, can only carry NOLs forward under Nebraska
law.
Analysis:
Neb. Rev. Stat. §77-2716(2) provides that state NOLs of individual taxpayers consistent with “…the laws
of the United States...” are to be allowed. Accordingly, if a federal carryback period for NOLs is extended
by an election of an alternative carryback period by the taxpayer, then the Nebraska carryback period is also
extended for the same period, and in the same manner.
Affected taxpayers carrying back the NOL to an earlier year should attach to their Nebraska return a copy
of their Federal Form 1045, 1040X, or another return or other documentation indicating the taxpayer has
elected an extended carryback period for eligible small business losses. The amended return can be filed
only after the taxpayer has filed a 2008 Nebraska Individual Income Tax Return, or 2008 Nebraska Fiduciary
Income Tax Return, and Form NOL, Nebraska Net Operating Loss Worksheet, to establish the Nebraska
NOL. If the 2008 return was filed without the Form NOL, attach the Form NOL to the amended return
carrying back the loss.
Alternately, Neb. Rev. Stat. §77-2734.07 only allows corporate taxpayers to carry forward an NOL for each
of the five taxable years after the year of the loss. Therefore, the recent change in federal carryback periods
is not applicable to corporate taxpayers.

APPROVED:

Douglas A. Ewald
Tax Commissioner
July 14, 2009

Nebraska Department of Revenue, P.O. Box 94818, Lincoln, Nebraska 68509-4818
www.revenue.ne.gov

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