Net Operating Loss (NOL) Deduction

§ 172. Net operating loss deduction(a) Deduction allowedThere shall be allowed as a deduction for the taxable year an amount equal to—(1) in the case of a taxable year beginning before January 1, 2021, the aggregate of the net operating loss carryovers to such year, plus the net operating loss carrybacks to such year, and (2) in the case of a taxable year beginning after December 31, 2020, the sum of—(A) the aggregate amount of net operating losses arising in taxable years beginning before January 1, 2018, carried to such taxable year, plus (B) the lesser of—(i) the aggregate amount of net operating losses arising in taxable years beginning after December 31, 2017, carried to such taxable year, or (ii) 80 percent of the excess (if any) of—(I) taxable income computed without regard to the deductions under this section and sections 199A and 250, over (II) the amount determined under subparagraph (A). For purposes of this subtitle, the term “net operating loss deduction” means the deduction allowed by this subsection. (b) Net operating loss carrybacks and carryovers(1) Years to which loss may be carried(A) General ruleA net operating loss for any taxable year—(i) shall be a net operating loss carryback to the extent provided in subparagraphs (B), (C)(i), and (D), and (ii) except as provided in subparagraph (C)(ii), shall be a net operating loss carryover—(I) in the case of a net operating loss arising in a taxable year beginning before January 1, 2018, to each of the 20 taxable years following the taxable year of the loss, and (II) in the case of a net operating loss arising in a taxable year beginning after December 31, 2017, to each taxable year following the taxable year of the loss. (B) Farming losses(i) In generalIn the case of any portion of a net operating loss for the taxable year which is a farming loss with respect to the taxpayer, such loss shall be a net operating loss carryback to each of the 2 taxable years preceding the taxable year of such loss. (ii) Farming lossFor purposes of this section, the term “farming loss” means the lesser of—(I) the amount which would be the net operating loss for the taxable year if only income and deductions attributable to farming businesses (as defined in section 263A(e)(4)) are taken into account, or (II) the amount of the net operating loss for such taxable year. (iii) Coordination with paragraph (2)For purposes of applying paragraph (2), a farming loss for any taxable year shall be treated as a separate net operating loss for such taxable year to be taken into account after the remaining portion of the net operating loss for such taxable year.