Insights Blog

01 Apr, 2016

Crossing the Line! Connecticut's Most Recent NOL Change

Posted by Andy McComas on Apr 1, 2016 8:30:16 AM


Lousiana modified NOL for any returns filed afer July 1, 2015

January 10, 49 BC – Julius Caesar leads a legion of his soldiers across the Rubicon River, the boundary line separating the Roman Republic from the frontiers to the north, and as a result breaks the ancient Roman law of imperium.  The eventual consequence of this act, his assassination, occurred on the Senate steps just over five years later on March 15, 44 BC. 


In June 2015 Connecticut crossed its own proverbial Rubicon with changes to its tax regime that would increase the total tax burden of many corporate taxpayers. Despite a last ditch legislative effort in late December, Connecticut’s worsening business tax climate contributed to General Electric’s decision to move their headquarters out of state to Boston, MA.


One of the eleventh hour changes intended to persuade General Electric to remain in Connecticut pertained to modifications in the combined group NOL limitation election. In the June legislation, the use of NOLs in Connecticut was sharply curtailed, including the following limitations:

  • The legislature enacted a limitation on state NOL utilization for tax years beginning on or after January 1, 2015. The limitation restricts NOL utilization to the lesser of: (1) 50% of income reported; or (2) the remaining NOL carryover into that year.
  • An exception to this rule is provided to taxpayers filing as a combined group if that group had $6bn of Connecticut NOL carry forwards from income years beginning prior to January 1, 2013.
  • The election, which is to be made with the group’s 2015 return, requires the group to relinquish 50% of their NOL carry forward. By so doing, it may then use the remaining NOLs to offset 100% of the group’s taxable income in years beginning on or after January 1, 2017, until such NOLs are exhausted or expired. Thereafter, all NOLs generated in 2015 and beyond will be subject to the 50% limitation.
  • The legislation did not change the carry forward time period for NOLs in Connecticut. That period continues to be 20 years for years beginning on or after January 1, 2000. No carrybacks are allowed.


The December legislation modified the combined group election (described above) by allowing the group to use its NOLs in years beginning on and after January 1, 2015 (previously January 1, 2017) under the election. In addition, the December legislation limited the utilization of NOLs to the amount which reduces income tax to, but not below, $2.5mm annually, before surcharge and credits.


State NOL Management:  

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