R9. Operating Loss Carry-Forward  

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  • A. The same method of accounting and apportionment must be used in the year to which an operating loss is carried as was used in the year in which the operating loss was sustained. The tax commissioner may grant an exception in the event a taxpayer is required by law to change the method of apportionment.

    B. A short fiscal year (a fiscal year of less than 12 months) brought about by a change in accounting period, a new taxpayer selecting a short fiscal year, or a taxpayer operating in the Municipality for less than his full accounting period, shall be considered as a full taxable fiscal year for purposes of loss carry-forward.

    C. In any return in which a net operating loss deduction is claimed, a schedule must be attached showing:

    1) Year in which net operating loss was sustained.

    2) Method of accounting and apportionment used to determine portion of net operating loss allocable to the Municipality.

    3) Amount of net operating loss used as a deduction in prior years.

    4) Amount of net operating loss claimed as a deduction in current year.

    D. The net operating loss of a taxpayer that loses its identity through merger, consolidation, etc., shall not be allowed as a carry-forward loss deduction to the surviving or new taxpayer.

    E. With respect to a return combining taxable income from two or more sources, the following rules shall be applied:

    1) Losses from the operation of a business or profession are not deductible from employee earnings but may be carried forward as set forth in Section 311-9

    2) In the case of an individual a loss from the operation of a business or profession may be offset against net profits from other business or professional activities.

    F. Resident individuals are permitted to adjust their net operating loss carry-forward for taxes paid to other municipalities in cases where the taxpayer would normally receive a credit for these taxes under Section 311-73, except that the taxpayer's other business activities result in losses that offset all or part of their net profits. The adjustment is calculated by dividing the amount of the allowable unused tax credit by the Municipal tax rate. The allowable credit is limited to the amount of the net profit tax paid to other municipalities on sole proprietorship or pass-through entity income that is normally taxable to the Municipality at a tax rate not to exceed that of the Municipality. Taxes on qualifying wages paid to other municipalities are not includible in the adjustment.

    G. Losses from the operation of a farm, determined in accordance with accounting methods used by taxpayer for federal income tax purposes, shall be allowable as an offset to net profit as set forth herein.