New York Prior NOL Conversion Subtraction Pool Calculation
NY State prior NOL conversion (PNOLC ) Subtraction Pool equals
[ (Unabsorbed NY state NOLs) x (2014 BAP) multiply by (2014 tax rate) ] divided by 6.5%
- Use 1/10 of pool per year carryforwardable over 20 years; OR
- Use ½ of pool in 2015 and ½ in 2016
In addition to a new NOL that may arise in a year beginning with 2015, a taxpayer would have the benefit of its pre-2015 NOL, calculated based upon the above transition rules, providing for a “prior NOL conversion” (PNOLC) subtraction pool that is calculated with reference to the “base year” of 2014.
- An “unabsorbed NOL” is determined as of the end of the base year (for calendar year taxpayers, 2014).
- This amount is multiplied by the Business Allocation Percentage for the base year,
- The product of this is then multiplied by the NY tax rate applicable in the base year (i.e., typically 7.1% in 2014).
- This resulting amount is then divided by (generally) 6.5%, the NY tax rate under the new law.
The amount of a taxpayer’s Conversion Subtraction will be deductible either:
|1. at a maximum of (1/10th per year) on a 20-year carryforward basis (i.e., in a given year, in addition to the unused Conversion Subtraction from prior years).|
- This means if NY income allows, you could potentially extinguish your PNOLC in 10 years. For those future tax years with losses, you can continue carrying forward to future years ending in 2035.
- Think of this as 10-year minimum / 20-year maximum for the acceleration / carryforward period for PNOLC
|2. Alternatively, a one?time election, which must be made on a timely filed return for the tax year beginning on or after January 1, 2015, but before January 1, 2016 (the 2015 tax year for calendar year filers), is allowable to deduct up to half of the Conversion Subtraction pool over a two?year period|
- ½ of the PNOLC will be deducted in 2015; ½ in 2016
|3. A taxpayer making this election cannot carryforward any unused amount of the Conversion Subtraction beyond that two?year period.|
|4.The PNOLC is INELIGIBLE FOR CARRYBACK|
Under NOL ordering rules, note that NY NOL deductions for tax years going forward will be applied after the PNOLC subtraction.
Small business corporation exception
The PNOLC subtraction of a small business corporation as defined in §210.1(f) is not subject to the one-tenth limitation. A small business corporation’s PNOLC subtraction available for use in the first tax period succeeding its base year is equal to 100% of its PNOLC subtraction pool. Any unused amount is eligible for carryforward for no longer than 20 tax periods following the base year.
|A small business taxpayer is defined as a taxpayer with|
- business income of $390,000 or less, OR $1 million or less in the aggregate amount of money and other property it received for stock, as a contribution to capital and as paid-in surplus, AND
- 100 or fewer New York employees.
- The taxpayer cannot be part of an affiliated group unless the group, if it had filed a combined return, met the small business test
For more information or questions, please reach out to our National Tax Services Team at [email protected].
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