Current through Register 1531, September 27, 2024
(1)
Statement of Purpose, Outline
of Topics.
(a)
Purpose of Regulation. 830 CMR 63.30.2, explains the
deductions for net operating losses incurred in previous taxable years allowed
to certain corporations by M.G.L. c. 63, § 30.5 in determining net income
for a taxable year.
(b)
Outline of Topics. 830 CMR 63.30.2 is organized as
follows:
(1) Statement of Purpose, Outline of
Topics
(2) Definitions
(3) Allowance of Net Operating Loss
Deduction
(4) Computation and
Taking of the Net Operating Loss Deduction
(5) Carry Forward of Net Operating
Loss
(6) Examples
(7) S Corporations
(8) Corporations Subject to Combined
Reporting
(9) Mergers and Changes
of Ownership
(2)
Definitions. For
purposes of this regulation, 830 CMR 63.30.2, the following terms shall have
the following meanings, unless the context requires otherwise.
Code, the Internal Revenue Code, as
amended and in effect for the taxable year.
Commissioner, the Commissioner of the
Massachusetts Department of Revenue or the Commissioner's duly authorized
representative.
Corporation, a business corporation
organized under or subject to M.G.L. c. 156B, subject to the excise imposed by
M.G.L. c. 63, § 32 or 32D(b), or a corporation, association, or
organization established under laws other than those of Massachusetts, subject
to the excise imposed by M.G.L. c. 63, § 39 or 32D(b).
Deduction or deductions, the
deductions for net operating losses incurred in previous taxable years allowed
by either M.G.L. c. 63, § 30.5(b) or M.G.L. c. 63, § 30.5(c).
Documentary evidence, original source
documents that substantiate a claim for the deduction, including but not
limited to articles of incorporation, stock certificates, and tax returns, but
generally not including affidavits.
Eligible Business Corporation, a
business corporation as defined in M.G.L. c. 63, § 30.1 that is subject to
the excise imposed by M.G.L. c. 63, § 39. The term eligible business
corporation does not include a financial institution taxable under M.G.L. c.
63, § 2; a security corporation taxable under M.G.L. c. 63, § 38B; or
a corporation exempt from the corporate excise, as stated in M.G.L. c. 63,
§ 68C.
Federal Net Operating Loss, a net
operating loss computed under Code § 172 for a taxable year for purposes
of determining the federal net operating loss deduction.
Federal net operating loss deduction,
the deduction for net operating loss incurred in previous taxable years allowed
by Code § 172.
General net operating loss deduction,
the deduction for net operating losses incurred in previous taxable years
allowed by M.G.L. c. 63, § 30.5(b).
Net income for purposes of determining the general
net operating loss deduction, net income determined under the
provisions of M.G.L. c. 63, § 30.4, without regard to the net operating
loss deduction allowed by M.G.L. c. 63, § 30.5.
Net income, net income determined
under M.G.L. c. 63, § 30.4, for purposes of computing the income measure
of the corporate excise.
Net operating loss, the amount by
which the sum of the deductions allowed under M.G.L. c. 63, § 30.4, not
including the deductions for net operating loss allowed by M.G.L. c. 63, §
30.5, and the dividends received deduction allowed by M.G.L. c. 63, §
38(a)(1), exceeds gross income determined under the provisions of M.G.L. c. 63,
§30.3, for a taxable year.
Net Operating Loss Deduction, the
deduction for net operating losses incurred in previous taxable years allowed
by M.G.L. c. 63, § 30.5(b).
Net Income, net income determined
under M.G.L. c. 63, § 30.4 for purposes of computing the income measure of
the corporate excise.
Net Operating Loss, the amount by
which the deductions allowed under M.G.L. c. 63, § 30.4, including the
dividends-received deduction allowed in M.G.L. c. 63, § 38(a)(1), but not
including a deduction for a net operating loss allowed by M.G.L. c. 63, §
30.5, exceeds gross income for a taxable year determined under the provisions
of M.G.L. c. 63, § 30.3. A capital loss is not a net operating loss and
cannot be carried forward.
Start-up Corporation Net Operating Loss
Deduction, the deduction for net operating losses incurred in
previous taxable years allowed by M.G.L. c. 63, § 30.5(c).
Taxable Year, any fiscal or calendar
year or period for which a corporation is required to file a federal income tax
return.
Taxable Net Income, net income less
the Massachusetts dividends received deduction allowed by M.G.L. c. 63, §
38(a)(1).
(3)
Allowance of Net Operating Loss Deduction.
(a)
General Rule. In
calculating net income for a taxable year, M.G.L. c. 63, § 30 allows an
eligible business corporation to claim a deduction for net operating losses
incurred in previous taxable years,
i.e., a net operating loss
carry forward. The statute provides a choice between two deductions, the net
operating loss deduction, under M.G.L. c. 63, § 30.5(b) and the start-up
corporation net operating loss deduction, under M.G.L. c. 63, § 30.5(c).
Because the limitations on the net operating loss deduction set
forth in M.G.L. c. 63, § 30.5(b)(1), (2), and (3) have expired, and
because the start-up corporation net operating loss deduction allows for a
shorter carry forward period than is allowed by the net operating loss
deduction, the start-up corporation net operating loss deduction under M.G.L.
c. 63, § 30.5(c) is functionally obsolete. Consequently, 830 CMR 63.30.2
does not provide rules for taking the start-up corporation net operating loss
deduction.
(b)
Losses Attributable to a Period During Which a Business Corporation
is Not Subject to Massachusetts Tax Liability. An otherwise
eligible business corporation that incurs a loss during a period in which the
corporation is not subject to tax liability in Massachusetts is not permitted
to claim, or carry forward, those losses. See830 CMR
63.30.2(5)(g). For the rules applicable to net operating losses incurred during
a taxable year for which the eligible business corporation was subject to the
Massachusetts corporate excise, see830 CMR 63.30.2(5)(g)1.
See also 830 CMR 63.30.2(6); Example
5.
(c)
Transition Rule for Former Utility Corporations.
Eligible business corporations that were classified as utility corporations
subject to tax under former M.G.L. c. 63, § 52A, may not carry forward or
deduct a loss incurred in a tax year beginning before January 1, 2014. However,
such eligible business corporations may carry forward a net operating loss
incurred in a tax year beginning on or after January 1, 2014.
(d)
Corporations Subject to the
Massachusetts Unrelated Business Income Tax (UBIT). A business
corporation that is exempt from taxation under Code § 501 is subject to
tax under M.G.L. c. 63, § 39 on its unrelated business taxable income
(see M.G.L. c. 63, § 38Y). A business subject to tax on
its UBIT may claim a net operating loss to the extent the taxpayer incurs
losses from unrelated business taxable income.
(e)
Life Sciences Tax Incentive
Program. Under M.G.L. c. 63, § 30.17 and M.G.L. c. 23I,
§ 5, an eligible business corporation engaged in business as a certified
life sciences company as defined in M.G.L. c. 23I, § 2 and authorized by
the life sciences tax incentive program is entitled to carry forward a net
operating loss for not more than 15 years from the year such loss was incurred.
Because all eligible business corporations are now entitled to carry forward a
net operating loss for up to 20 years from the year the loss was incurred, this
statutory provision relating to life sciences companies is functionally
obsolete.
(4)
Computation and Taking of the Net Operating Loss
Deduction.
(a)
Computing a Net Operating Loss in a Taxable Year. A
net operating loss incurred by a corporation in a given taxable year must be
computed without considering its net operating losses incurred in prior years.
See M.G.L. c. 63, § 30.5. A corporation's net operating
loss incurred in a given taxable year is equal to the amount by which its
deductions allowed under M.G.L. c. 63, § 30.4, including the
dividends-received deduction allowed under M.G.L. c. 63, § 38(a)(1), but
not including a deduction for a net operating loss carry forward from a prior
year, exceed its gross income for the taxable year.
(b)
Allowable Net Operating Loss
Deduction for a Current Taxable Year. The amount of an eligible
business corporation's net operating loss deduction for a taxable year is the
lesser of the sum of the corporation's net operating losses available for carry
forward from previous taxable years under the provisions of 830 CMR 63.30.2(5),
or the maximum amount of the corporation's deduction determined under the
limitation provision of 830 CMR 63.30.2(4)(c).
1.
Losses Available for Carry
Forward. The amount of an eligible business corporation's net
operating loss available for carry forward from a previous taxable year is the
corporation's net operating loss for the taxable year as calculated under 830
CMR 63.30.2(4), that may be carried over under the provisions of 830 CMR
63.30.2(5), reduced by the amount of the corporation's net operating loss for
such taxable year that has been previously deducted. An eligible business
corporation may have net operating loss carry forwards from multiple
years.
2.
An Eligible
Business Corporation's Net Operating Losses Previously Deducted.
The amount of an eligible business corporation's net operating loss previously
deducted is the amount of the corporation's net operating loss incurred in a
taxable year that already has been deducted under the provisions of M.G.L. c.
63, § 30.5, in taxable years beginning after the taxable year in which the
corporation's loss occurred and before the current year.
See830 CMR 63.30.2(5)(c).
(c)
Limitation of the
Deduction. The amount of the net operating loss deduction may not
exceed 100% of the corporation's net income as computed under 830 CMR
63.30.2(4)(b). The amount of net operating loss disallowed as a deduction for a
taxable year because of the foregoing limitation may be carried forward to one
or more subsequent taxable years to the extent allowed under the carry forward
rules of 830 CMR 63.30.2(5).
(d)
Net Income Defined for Purposes of Applying the Limitations on the
Net Operating Loss Deduction. For purposes of applying the
limitation on the amount of the net operating loss deduction set forth at 830
CMR 63.30.2(4)(c), an eligible business corporation's net income for a taxable
year is its net income as defined in M.G.L. c. 63, § 30.4, determined
without regard to the net operating loss deduction(s) allowed under M.G.L. c.
63, § 30.5, and after applying the apportionment provisions of M.G.L. c.
63, §§ 38 and 42.
(e)
Adjustments to Deductions; Adjustments Based on the Taking of
Certain Credits. Certain Massachusetts statutes including, without
limitation, M.G.L. c. 63, §§ 31E, 38H(b)(1), and 38M, require
business corporations to make adjustments with respect to deductions or the
taking of credits in determining their net income. In the event an eligible
business corporation is required by statute to make such an adjustment, the
eligible business corporation must make a corresponding adjustment in
calculating its net operating loss.
Examples of such adjustments that will affect the net operating
loss deduction include, without limitation, those referenced at M.G.L. c. 63,
§ 38H(b)(1) (modifying certain deductions with respect to expenditures for
solar and wind power equipment), M.G.L. c. 63, § 31E (requiring an
adjustment to a depreciation deduction for a company shuttle van purchase or
lease if a credit is taken), and M.G.L. c. 63, § 38M (requiring an
adjustment to business expense deductions for research expenses that are
eligible for a credit).
(f)
Disregard of Certain Other Deductions, Adjustments, and
Credits. An eligible business corporation's net operating loss is
determined solely with reference to M.G.L. c. 63, § 30 and §
38(a)(1). Except as provided in 830 CMR 63.30.2(4)(e), any deduction,
adjustment, or credit allowed by any other provision of M.G.L. c. 63, or by the
Code, is disregarded in determining a net operating loss. Examples of such
other items include, without limitation:
1.
Deductions not included in M.G.L. c. 63, § 30 or § 38(a)(1), such as
those taken from taxable net income apportioned to Massachusetts, including
those at M.G.L. c. 63, § 38F (deduction from a business corporation's
post-apportioned net income for compensation paid to certain individuals) and
M.G.L. c. 63, § 38H (deduction from a business corporation's net income
with respect to expenditures for solar and wind power equipment).
2.
Massachusetts
Credits. Net operating loss is computed without regard to any of
the credits against the corporate excise allowed under M.G.L. c. 63.
3.
Federal
Adjustments. Any deduction, adjustment, and credit allowed by the
Code but not allowed by M.G.L. c. 63, § 30 and § 38(a)(1) including,
without limitation, bonus depreciation and the federal production activity
deduction, is disregarded in determining a net operating loss.
(g)
Net Operating Loss
Computed on a Post-apportionment Basis. For tax years beginning on
or after January 1, 2010, where an eligible business corporation does business
both within and outside of Massachusetts, the corporation's allowable net
operating loss is determined and carried forward by multiplying the loss by the
corporation's apportionment percentage as determined under M.G.L. c. 63, §
38 for the taxable year in which the loss is incurred, with respect to the
business that generated the loss. Such loss is to be deducted by the eligible
business corporation from its taxable net income allocated or apportioned to
Massachusetts.
(5)
Carry Forward of Net Operating Loss.
(a)
General. A net
operating loss incurred in a taxable year beginning on or after January 1, 2010
may be carried forward to the 20 succeeding taxable years following the year in
which the loss was incurred.
(b)
Ordering Rules. A net operating loss carry forward
must be deducted after all current deductions allowed in determining current
taxable net income, including the dividends received deduction allowed by
M.G.L. c. 63, § 38(a)(1). A net operating loss must be carriedover to the
earliest succeeding taxable year in which it may be used. The portion of such
loss that may be carried over to a succeeding taxable year is the excess, if
any, of the amount of such loss over the sum of the taxable income for each of
the prior taxable years to which such loss may have been carried. The portion
of the net operating loss that is not used in the earliest succeeding taxable
year may be carried over to a subsequent succeeding taxable year within the
applicable carry forward period set forth at 830 CMR 63.30.2(5)(a).
(c)
Amount of Loss That May Be
Carried Forward. The amount of net operating loss incurred in a
taxable year that may be carried forward to a succeeding taxable year is
determined using the following steps:
1.
Compute the net operating loss for the taxable year under the provisions of 830
CMR 63.30.2(4). Losses incurred by an otherwise eligible business corporation
in a taxable year during which the corporation is not subject to the corporate
excise are not treated as net operating losses and are not eligible for the net
operating loss deduction, in accordance with the rule at 830 CMR 63.30.2(3)(b).
The net operating loss for the taxable year must be determined under the law
applicable to the taxable year in which the loss was incurred, without regard
to the law applicable to the taxable year to which the net operating loss is
being carriedforward. The result is the corporation's net operating loss to be
carried forward from the taxable year in which the loss was incurred.
2. Subtract from the net operating loss that
is carriedforward, as determined under 830 CMR 63.30.2(5)(c)1., the amount of
such net operating loss that was previously deducted under the provisions of
M.G.L. c. 63, § 30.5, in taxable years beginning after the taxable year in
which the loss was incurred. The result is the amount of the net operating loss
incurred in the taxable year that is available for carry forward.
(d)
Amount of Net
Operating Loss Available for Carry Forward. The amount of the net
operating loss that is available for carry forward to a taxable year is the sum
of the net operating losses available for carry forward from previous taxable
years, determined under 830 CMR 63.30.2(5)(c), that may be carriedforward under
the applicable period set forth at 830 CMR 63.30.2(5)(a).
(e)
Unused Net Operating
Loss. Net operating loss incurred in a taxable year that is not
deducted within the period set forth at 830 CMR 63.30.2(5)(a), is lost and may
not be deducted for Massachusetts corporate excise purposes.
(f)
Short Taxable
Years. A taxable year that consists of less than 12 months is
treated as a full taxable year for purposes of this regulation, 830 CMR
63.30.2.
(g)
Rules and
Calculations for Certain Years.
1.
Losses Not Allowed for Years a
Corporation is Not Subject to the Corporate Excise. Eligible
business corporations may not deduct net operating losses that were incurred in
taxable years during which the corporation was not subject to the corporate
excise. See830 CMR 63.30.2(3)(b).
2.
Carry Forward
Years. After a corporation generates a specific net operating
loss, each subsequent year counts in determining the remaining carry forward
period associated with that loss, as set forth at 830 CMR 63.30.2(5)(a), even
if the corporation was not subject to the income measure of the corporate
excise in such year. There is no adjustment to the amount of a net operating
loss that is being carriedforward in years that the corporation is not subject
to the income measure of the corporate excise.
(6)
Examples. The
following examples illustrate the provisions of 830 CMR 63.30.2(1) through (5).
For purposes of these examples, assume that all of the corporations are
calendar year taxpayers that are not subject to the combined reporting rules at
M.G.L. c. 63, § 32B, and therefore file separate returns. Further assume
that none of the corporations claim a Massachusetts dividends received
deduction, unless otherwise stated. The corporations do not carry any net
operating loss back to previous taxable years for federal tax purposes, unless
otherwise stated.
Example 1. Alpha Centauri, Inc., a
Massachusetts business corporation, is organized and begins doing business
exclusively in Massachusetts in 2009. In 2009 Alpha Centauri incurs a net
operating loss of $100,000. In 2010 Alpha Centauri has net income of $50,000,
determined without regard to the net operating loss deduction.
As an eligible business corporation, Alpha Centauri may claim
the net operating loss deduction. Alpha Centauri takes a net operating loss
deduction of $50,000, resulting in net income of $0 for 2010 and $50,000 of net
operating loss available for carry forward. Alpha Centauri may not deduct more
than 100% of its net income in a tax year.
Example 2. Same facts as
Example 1. In 2011, Alpha Centauri has net income of
$80,000, determined without regard to the net operating loss deduction. Alpha
Centauri is eligible for a net operating loss deduction of $50,000, the carry
forward amount available carry forward from 2010, resulting in net income of
$30,000, with no further net operating loss available for carry forward.
Example 3. Rigel, Inc., a
Massachusetts business corporation, is organized in 2015 and during that tax
year does business exclusively in Massachusetts. In 2015, Rigel incurs a net
operating loss of $150,000, which it is entitled to carry forward. In 2016,
Rigel has gross income of $100,000 and allowable deductions under M.G.L. c. 63,
§ 30.4 of $50,000, determined without regard to the prior year net
operating loss deduction.
Rigel's net income in 2016 is $50,000, determined by
subtracting its allowed deductions under M.G.L. c. 63, § 30.4 from its
gross income. As an eligible business corporation, Rigel may claim the net
operating loss deduction. Using its net operating loss carry forward, Rigel
applies a net operating loss deduction of $50,000, resulting in net income of
$0 for 2016 and $100,000 of remaining net operating loss carry forward. Rigel
incurs no net operating loss in 2016 because its deductions under M.G.L. c. 63,
§ 30.4 do not exceed its gross income.
Example 4. Betelgeuse, Inc. is a
business corporation that has been in existence for several years. In 2009
Betelgeuse does not do business in Massachusetts, but incurs a loss for the
year. In 2010 Betelgeuse does business in Massachusetts and incurs a
pre-apportioned loss of $60,000. Betelgeuse may not claim a net operating loss
deduction for the loss incurred in 2009 because it was not subject to
Massachusetts tax during that year. Betelgeuse may claim a net operating loss
deduction for the loss incurred in 2010 when computing net income for 2011. The
deduction is computed as follows:
The pre-apportionment amount of loss available to Betelgeuse
for carry forward from 2010 is $60,000. Betelgeuse must convert its
pre-apportionment loss figures to post-apportionment net operating loss by
multiplying the loss by its Massachusetts apportionment percentage for the year
in which the loss was incurred. Betelguese's apportionment percentage for 2010
is 25%. Betelgeuse thus has a post-apportionment net operating loss available
to carry forward from 2010 of $15,000, calculated as follows: $60,000 *
25%.
In 2011, Betelgeuse does business in Massachusetts and has net
income of $100,000, determined without regard to the net operating loss
deduction. Betelgeuse's Massachusetts apportionment percentage is 10% for 2011.
Betelgeuse's taxable net income apportioned to Massachusetts for 2011 is
$10,000, calculated as follows: $100,000 net income * 10% apportionment
percentage = $10,000 taxable net income.
Betelgeuse's net operating loss deduction for the taxable year
2011 is $10,000, the lesser of the $15,000 of net operating loss available for
deduction from 2010, or the $10,000 maximum deduction, namely 100% of the
corporation's net income, determined under 830 CMR 63.30.2(4)(c). Betelgeuse
has Massachusetts net income of $0, computed by subtracting the $10,000 net
operating loss deduction from $10,000 of Massachusetts net income, determined
without regard to the net operating loss deduction. After 2011, Betelgeuse has
$5,000 of net operating loss available to carry forward. The entire $5,000 is
attributable to the 2010 net operating loss.
Example 5: Assume the same facts as in
Example 4 and that Betelgeuse does not have net income
that is subject to the income measure of the Massachusetts corporate excise tax
from 2012 through 2014. In 2012, Betelgeuse does no business in Massachusetts
and is not taxable in the state. In 2013 and 2014, Betelgeuse resumes doing
business in Massachusetts and is therefore taxable in the state, but is
protected from the imposition of the income measure of the corporate excise by
Public Law 86-272 (note that Betelgeuse would nonetheless be subject to the
non-income measure of the corporate excise or the minimum excise). In 2015,
Betelgeuse continues its business activity in Massachusetts, but is no longer
protected by Public Law 86-272, and is thus subject to the income measure of
the corporate excise. In 2015, Betelgeuse has net income of $8,000, determined
without regard to the net operating loss deduction. Betelgeuse's Massachusetts
apportionment percentage is 20% in 2015. Thus, Betelgeuse's post-apportioned
Massachusetts net income is $1,600 in 2015.
Betelgeuse may claim the net operating loss deduction for
losses incurred in 2010 when computing its 2015 net income. The amount
available to carry forward from 2010 is $5,000, determined as follows.
Betelgeuse must subtract from the $15,000 post-apportioned net operating loss
incurred in 2010, the $10,000 of that loss that was deducted in 2011, leaving
$5,000. Betelgeuse makes no adjustment to the $5,000 carry forward amount in
2012, 2013 and 2014, although those three years count in determining the
remaining carry forward period associated with the loss incurred in 2010 Thus
the remaining $5,000 carry forward from 2010 is available for use in
2015.
The maximum allowable amount of Betelgeuse's net operating loss
deduction for 2015 is $1,600, namely, 100% of the corporation's net income for
purposes of applying the limitations on the net operating loss deduction, as
set forth in 830 CMR 63.30.2(4)(c), determined by multiplying the corporation's
net income of $8,000 by its apportionment percentage of 20%.
Betelgeuse's net operating loss deduction for the taxable year
is $1,600 resulting in Massachusetts net income of $0, determined by
subtracting the $1,600 net operating loss deduction from $1,600 of
Massachusetts net income as set forth in 830 CMR 63.30.2(4)(c).
After subtracting the $1,600 of net operating loss from the
total available net operating loss of $5,000 carriedforward from tax years 2010
- 2014, Betelgeuse has $3,400 of net operating loss remaining that is
attributable to 2010. Because losses incurred in a taxable year beginning on or
after January 1, 2010 may be carried forward 20 taxable years from the year in
which they are incurred, including taxable years during which a corporation is
not subject to the income measure of the corporate excise in Massachusetts, the
$3,400 of net operating loss is available to carry forward to subsequent
taxable years until 2030.
Example 6. In taxable year 2030,
Corporation X has a Massachusetts net income of $10,000. This net income figure
was calculated by taking into account a dividends received deduction of $5,000
that Corporation X was eligible to take in 2030. Corporation X has a net
operating loss of $20,000 generated in 2010 that was carriedforward and never
used. Corporation X is permitted to use $10,000 of the carried forward loss
against its net income of $10,000. The remaining $10,000 of loss generated in
2010 is not eligible for further carry forward, and is lost.
(7)
S Corporations.
An S corporation that is subject to the income measure of the corporate excise
under M.G.L. c. 63, §§ 32D, 39 may claim a net operating loss
deduction for net operating losses as provided in 830 CMR 63.30.2(7),
830
CMR 62.17A.2, and in particular,
830
CMR 62.17A.2(8)(c)3.
Application of the statutory rule under M.G.L. c. 63, § 32D that imposes
the net income measure of the corporate excise based on an S corporation's
total receipts for the taxable year may result in an S corporation being
subject to the income measure in some years, but not others. The rules for the
carrying forward of a net operating loss for years that an S corporation is not
subject to the income measure of the corporate excise are set forth in
830
CMR
62.17A.2(8)(c)3.c.
(8)
Corporations Subject to
Combined Reporting. For corporations subject to combined reporting
under M.G.L. c. 63, § 32B, the rules that explain the carry forward of
losses are set forth in the Combined Reporting regulation. See
830 CMR
63.32B.2(8).
(9)
Mergers and Changes of
Ownership.
(a)
Mergers. In the event of a merger of two or more
corporations where one corporation survives as the successor entity, the
surviving corporation retains any net operating loss that it separately
incurred before the merger, subject to the limitations of 830 CMR
63.30.2(9)(b). All of the net operating loss of a corporation absorbed in the
merger is lost. The surviving corporation may not deduct or carry forward the
net operating loss of a corporation it absorbs. In the event of a consolidation
of two or more previously existing corporations into a new corporation, the new
corporation starts with no net operating loss. All of the net operating loss of
the previously existing corporations is lost. The new corporation may not
deduct or carry forward any net operating loss incurred by any of the
previously existing corporations before the consolidation.
(b)
Changes in
Ownership. Where a corporation undergoes an ownership change, as
defined in Code § 382(g), the amount of the corporation's net income that
may be offset by pre-change net operating loss in any taxable year shall not
exceed the limitation imposed by Code § 382 (the "Code § 382
limitation"), subject to the following provisions:
1.
Adjusted § 382
Limitation. The Code § 382 limitation shall be adjusted by
multiplying the Code § 382 limitation by Massachusetts taxable net income,
allocated or apportioned to Massachusetts, determined without regard to the net
operating loss deduction, and dividing the resulting amount by federal taxable
income (determined without regard to the federal net operating loss deduction).
For corporations subject to combined reporting, the Adjusted § 382
limitation shall be calculated separately for each member of the combined
group.
2.
Carry Forward
of Adjusted § 382 Limitation. If the Adjusted § 382
limitation exceeds the taxable income of the corporation in a given post-change
year, the Adjusted § 382 limitation for the following year shall be
increased by the amount of such excess.
3. The Adjusted § 382 limitation shall
be determined without regard to Code § 382(n), which has no effect for
Massachusetts tax purposes.
4.
Carry Forward of Non-deducted Net Operating Loss Due to the
Adjusted § 382 Limitation. Any amount of net operating loss
that cannot be deducted because of the Adjusted § 382 limitation may be
carriedover as provided in 830 CMR 63.30.2(6).
(c)
Corporate
Reorganizations. The Massachusetts net operating loss carry
forward generally does not survive a transaction that qualifies as a
reorganization under Code § 368, except as otherwise provided in 830 CMR
63.30.2(9)(a). However, if a transaction qualifies as a reorganization under
Code § 368(a)(1)(F), the Massachusetts net operating loss carry forward
will be preserved to the extent that it could have been used by the predecessor
corporation.
REGULATORY AUTHORITY
830 CMR 63.30.2: M.G.L. c. 14, §6(l); M.G.L. c. 62C,
§ 3
