New Jersey Administrative Code
Title 18 - TREASURY - TAXATION
Chapter 7 - CORPORATION BUSINESS TAX ACT
Subchapter 5 - ENTIRE NET INCOME; DEFINITION, COMPONENTS AND RULES FOR COMPUTING
Section 18:7-5.13 - New Jersey net operating loss carryover

(a) For privilege periods ending before July 31, 2019, a New Jersey net operating loss, as defined at N.J.A.C. 18:7-5.15, for any privilege period ending after June 30, 1984, becomes a net operating loss carryover. The net operating loss carryover is carried to each of the succeeding privilege periods and is reduced in each such succeeding privilege period by the amount of entire net income before net operating loss deduction and before exclusions, and is further reduced to zero seven privilege periods following the privilege period of the loss, taking into account the normal or extended due date for filing the return for the seventh privilege period succeeding the privilege period of the loss. The net operating loss carryover may not be carried back to any privilege period preceding the privilege period of the loss. For this purpose, privilege period shall mean the accounting period covered by the taxpayer's return. In no event may a net operating loss carryover be used for a net operating loss deduction on the eighth return succeeding the loss privilege period. Notwithstanding the foregoing, a net operating loss for any privilege period ending after June 30, 2009, shall be permitted as a net operating loss carryover to each of the 20-privilege periods following the privilege period of the loss.

(b) The net operating loss may only be carried over by the actual corporation that sustained the loss. The net operating loss may, however, be carried over by the corporation that sustained the loss and which is the surviving corporation of a statutory merger. The net operating loss may not be carried over by a taxpayer that changes its state of incorporation or is a part of a statutory consolidation. Section 4(k) of the Act defines entire net income in terms of a specific corporate franchise. See N.J.S.A. 54:10A-4.5.

(c) Corporations acquired under I.R.C. § 338 do not lose their net operating loss carryover because the corporate franchise remains unchanged to the extent it does not fall within the provisions of N.J.A.C. 18:7-5.14.

Example 1: A domestic corporation dissolves pursuant to laws of the State of New Jersey and incorporates in another state. This newly formed corporation of another state is a new legal entity for corporation business tax purposes and the net operating loss carryover of the domestic corporation is not available to the new entity.

Example 2: The example below illustrates the net operating loss carryover for the full term of seven years and demonstrates the application of net operating loss deductions in the proper sequence.

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(d) The following explain and/or define the above table: Line 28 is the amount of the taxpayer's taxable income, before net operating loss deduction and special deductions that the taxpayer is required to report to the United States Treasury Department for the purpose of computing its Federal income tax. New Jersey Adjustments are the statutory additions and deductions to line 28 that are peculiar to the New Jersey corporation business tax.

(e) For privilege periods ending on and after July 31, 2019, see N.J.A.C. 18:7-5.21.