Congress enacted the Federal Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020. Among other things, the Act addresses net operating losses (NOLs) and other related provisions.
- Section 2303 allows a five-year carryback for NOLs arising in the 2018, 2019, and 2020 tax years. Section 2303 also temporarily repeals the 80% of income limitation for tax years beginning before 2021.
- Section 2304 temporarily repeals the loss limitation for individuals, estates and trusts under section 461(l) of the Internal Revenue Code (IRC) for tax years beginning before January 1, 2021.
- Section 2306 amended section 163(j) of the IRC increasing the interest expense deduction for tax years 2019 and 2020.
- Section 2307 made some technical amendments to section 168(e) of the IRC related to qualified improvement property.
The above-provisions apply when a taxpayer calculates Montana taxable income. As a result:
- Some taxpayers may have to amend their 2018 and/or 2019 tax returns;
- Individuals, estates and trusts with an NOL incurred in tax years 2018 or 2019 may carry their NOL back five years and amend the corresponding returns filed in those years. A waiver of the carryback period will be available on their 2020 Montana income tax return for each impacted tax year.
As a result of the changes from the CARES Act to the treatment of NOLs for tax years 2018, 2019, and 2020, the department updated the Montana Net Operating Loss for Individuals, Estates and Trusts Schedule and it is now available to recalculate the NOL for 2018 and/or 2019 to carry back to previous years. Taxpayers will also use this schedule to calculate their 2020 NOL. Please note that a taxpayer cannot carry back a 2020 NOL before tax year 2020 has ended. To carry back a 2020 NOL, you must complete your 2020 return and include the Class B NOL Schedule.
For Corporations, amended return instructions and NOL provisions remain unchanged. See the Corporate Income Tax Return Instructions for more information.