Details of Public Law 116-260, section 281 , Election to Waive Application of Certain Modifications to Farming Losses

In general, California allows a taxpayer to calculate an NOL in accordance with federal rules, but has not conformed to the federal changes that apply to taxable years beginning after 12/31/2017 because California conforms to the IRC as of 1/1/2015, with modifications.

NOLs attributable to taxable years beginning on or after 1/1/2008, may be carried forward 20 years. For NOLs attributable to taxable years beginning before 1/1/2013, and after 12/31/2018, NOL carrybacks are unavailable. California conforms to the federal NOL carryback rules for NOLs attributable to taxable years beginning on or after 1/1/2013, and before 1/1/2019, with modifications.

AB 85 was chaptered on 6/29/2020, and it includes provisions to suspend the use of NOL deductions. The suspension does not apply to taxpayers with a net business income or modified adjusted gross income of less than $1 million under the PITL or for taxpayers with income subject to tax under the CTL of less than $1 million for taxable years 2020, 2021, and 2022. This provision also extends the carryover period for NOL deductions disallowed under this provision.

Therefore, the 80-percent taxable income limitation is not applicable in California and any NOL arising in a taxable year beginning after 12/31/2017, and before 1/1/2021, may not be carried back.