§ 105-130.8. Net economic loss. - North Carolina Statutes

§ 105‑130.8.  Neteconomic loss.

(a)        Net economic lossessustained by a corporation in any or all of the 15 preceding income years shallbe allowed as a deduction to the corporation subject to the followinglimitations:

(1)        The purpose inallowing the deduction of a net economic loss of a prior year is to grant somemeasure of relief to the corporation that has incurred economic misfortune oris otherwise materially affected by strict adherence to the annual accountingrule in the determination of net income. The deduction allowed in this sectiondoes not authorize the carrying forward of any particular items or category ofloss except to the extent that the loss results in the impairment of the neteconomic situation of the corporation so as to result in a net economic loss asdefined in this section.

(2)        The net economicloss for any year means the amount by which allowable deductions for the yearother than prior year losses exceed income from all sources in the yearincluding any income not taxable under this Part.

(3)        Any net economicloss of prior years brought forward and claimed as a deduction in any incomeyear may be deducted from net income of the year only to the extent that theloss carried forward from the prior years exceeds any income not taxable underthis Part received in the same year in which the deduction is claimed, exceptthat in the case of a corporation required to allocate and apportion to NorthCarolina its net income, only that proportionate part of the net economic lossof a prior year shall be deductible from total income allocable to this Stateas would be determined by the use of the allocation and apportionmentprovisions of G.S. 105‑130.4 for the year of the loss.

(4)        A net economic losscarried forward from any year shall first be applied to, or offset by, anyincome taxable or nontaxable of the next succeeding year before any portion ofthe loss may be carried forward to a succeeding year.

(5)        For purposes of thissection, any income item deductible in determining State net income under theprovisions of G.S. 105‑130.5 and any nonapportionable income notallocable to this State under the provisions of G.S. 105‑130.4 shall beconsidered as income not taxable under this Part. The amount of the income itemconsidered income not taxable under this Part is determined after subtractingrelated expenses for which a deduction was allowed under this Part.

(6)        No loss shall eitherdirectly or indirectly be carried forward more than 15 years.

(b)        A corporationclaiming a deduction for a loss for the current year or carried forward from aprior year must maintain and make available for inspection by the Secretary allrecords necessary to determine and verify the amount of the deduction. TheSecretary or the taxpayer may redetermine an item originating in a taxable yearthat is closed under the statute of limitations for the purpose of determiningthe amount of net economic loss that can be carried forward to a taxable yearthat remains open under the statute of limitations. (1939, c. 158, s. 322; 1941,c. 50, s. 5; 1943, c. 400, s. 4; c. 668; 1945, c. 708, s. 4; c. 752, s. 3;1947, c. 501, s. 4; c. 894; 1949, c. 392, s. 3; 1951, c. 643, s. 4; c. 937, s.4; 1953, c. 1031, s. 1; c. 1302, s. 4; 1955, c. 1100, s. 1; c. 1331, s. 1; cc.1332, 1342; c. 1343, s. 1; 1957, c. 1340, ss. 4, 8; 1959, c. 1259, s. 4; 1961,c. 201, s. 1; c. 1148; 1963, c. 1169, s. 2; 1965, c. 1048; 1967, c. 1110, s. 3;1998‑98, s. 69; 1998‑171, ss. 6, 8; 2002‑136, s. 3; 2003‑416,s. 5(i).)