Ref: SB167 signed by Gov Newsom this week.
SUSPENSION OF NET OPERATING LOSS DEDUCTION 1/1/24 – 12/31/2026.
Background: In California’s frequent times of financial difficulty, the Legislature often suspends the ability to use prior year net operating losses against current year income. This effectively raises CA taxes by taking away a deduction… And this deduction is more common during hard economic times.
Ideally this deduction will return to CA taxpayers for the year starting 1/1/2027, but the Legislature could extend the suspension.
Who is NOT subject to the suspension:
- Individual taxpayers who have net business income OR modified adjusted gross income of less than $1 million.
- Corporate taxpayers who have business income subject to CA taxation of less than $1 million. Business income is defined as income from a trade/business whether by the taxpayer or through a partnership, LLC, S corporation owned directly/indirectly by the taxpayer; OR rental income; OR a farming business.
