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The Coronavirus Aid, Relief, and Economic Security (CARES) Act was designed to provide stimulus relief to businesses affected by COVID-19 in the form of loans, grants, and tax changes.
The CARES Act included some important provisions relevant to NOLs. Specifically:
It suspends the 80% limitation on utilization of NOLs that were generated after December 31, 2017 for tax years beginning before January 1, 2021. So, when a company uses an NOL, it can use all of it. (For tax years beginning after December 31, 2020, the 80% limitation is reinstated.)
Companies can carry back NOLs that arose in tax years beginning after December 31, 2017 and before January 1, 2021 to offset taxable income generated in the previous five years.
In combination, these provisions could provide an immediate tax refund rather than delaying tax savings into future years. Also, given that federal tax rates decreased from 35% to 21% starting in 2018, an NOL carryback could provide higher tax savings than would be possible with an NOL carryforward.
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