Finance Committee Reviews Net Operating Loss Bill

The legislature’s Finance, Revenue, and Bonding Committee heard testimony March 20 on legislation expanding the eligibility period for deducting net operating losses.

SB 443 allows business operating losses incurred in income years beginning on or after Jan. 1, 2025, to be deductible over 30 income years, rather than the current 20-year allowance.

Net operating loss deduction carryforwards are important economic development tools utilized across the country that allow employers to prioritize human and physical capital investment by smoothing entrepreneurial risk and encouraging innovation across all industry sectors.

Under Connecticut’s current tax system, employers are disincentivized to make investments in their operations because the state’s NOL carryforward period and tax liability cap is less than many other states.

In fact, 19 other states follow the federal NOL provisions that allow for deductions up to 80% of the company’s tax liability over an indefinite period.

SB 443 brings Connecticut closer to conformity with many other states and the federal provisions.

The bill also permits an aggrieved taxpayer, under certain circumstances, to file a written request that the Commissioner of Revenue Services issue an order, decision, determination or disallowance if an appeal is not settled within one year.

It also requires that interest not accrue on tax underpayments resulting from certain amended returns related to the employee retention credit program.

CBIA supported the bill, which now awaits committee action by its April 4 deadline.

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For more information, contact CBIA’s Chris Davis (860.244.1931).