(1) Net operating
losses may be carried forward fifteen (15) years as net operating loss
carryovers.
(2) The term "net
operating loss" is defined by T.C.A. § 67-4-2006 of the excise tax law as
the excess of allowable deductions over total income allocable to this state
for the year of the loss. The loss is the same as that reported for federal
income tax purposes before any operating loss adjustment and special deductions
provided for in the Internal Revenue Code, and the loss is subject to the
adjustments (additions and subtractions) provided for in § 67-4-2006. The
amount of the loss that may be carried forward will be subject to the following
adjustments:
(a) There shall be added to the
net loss as determined for excise tax purposes all nonbusiness earnings, all
interest, dividends excluded from net earnings pursuant to § 67-4-2006 and
any other income excluded from net earnings pursuant to §
67-4-2006.
(b) With respect to
taxpayers doing business both within and without Tennessee, adjustment shall be
made to reflect the apportionment of the loss on the basis of business done
within and without the State of Tennessee during the loss year. After making
the adjustment as provided in subparagraph (a) hereof, the loss deductible for
Tennessee excise tax purposes shall be that portion of the total loss
apportioned to this state by the applicable statutory apportionment
formula.
(c) The net loss so
determined must be offset against the net earnings from business done within
the state for the succeeding year, and if not completely offset by the net
earnings from business done within the state for such year, the remainder of
such net loss may be offset against the net earnings from business done within
the state during the following year. In no case may any portion of such loss be
carried forward and used to offset net earnings for any period beyond the
applicable net loss carryover period as provided in paragraph (1) above, and in
applying the loss carryovers where losses for more than one year are involved,
the most remote year will be applied first.
