Examples

The following examples assume that the corporation has (1) no PNOLC subtraction in the year and (2) at least the amount of computed NOLD required to be utilized is available for deduction. While some examples may highlight multiple rules contained in this Subpart, the introductory text of the example is intended to highlight the main rule highlighted in each such example.
Example 1:
This example is intended to highlight that New York investment capital losses must be added back in computing the business income base and any net operating loss (NOL).
Taxpayer has a Federal loss of ($500,000), which includes a ($40,000) New York investment capital loss that resulted from the sale of its investment capital. The taxpayer must adjust its Federal taxable income (FTI) to account for such loss when computing the business income base and its NOL.
Federal taxable income (loss)
Adjustment for New York investment capital loss
Federal taxable income (loss) adjusted for New York investment capital loss
($500,000)
$40,000
($460,000)
Example 2:
This example is intended to highlight that the NOLD required to be utilized is the amount that reduces the tax on the business income base to the higher of the capital base tax or the fixed dollar minimum.
Taxpayer X computes its 2020 NOLD of $6,730,769 required to be utilized as follows:
NOL Deduction Schedule
Apportioned total business income after the PNOLC but before the NOLD
Business income base tax rate
$7,500,000
6.50%
Product of apportioned total business income after the PNOLC but before the NOLD and the business income base tax rate Capital base tax FDM Greater of capital base tax and FDM $487,500 $50,000 $20,000 $50,000 Difference between (a) product of apportioned total business income after PNOLC but before the NOLD and the business income base tax rate and (b) greater of capital base tax and FDM Business income base tax rate $437,500 6.50% Net operating loss deduction required to be utilized ($437,500/6.5%) $6,730,769 2021 2022 Entire net income ($5,000) $4,500 Investment income $360 Total business income ($5,000) $4,140 BAF 75% 85% Apportioned total business income after the PNOLC but before the NOLD ($3,750) $3,519 Business income base tax rate 6.5% Product of apportioned total business income after the PNOLC but before the NOLD and the business income base tax rate $229 Capital base tax $200 FDM $75 Greater of capital base tax and FDM $200 Difference between (a) product of apportioned total business income after PNOLC but before the NOLD and the business income base tax rate and (b) greater of capital base tax and FDM $29 Business income base tax rate 6.5% NOLD required to be utilized $442 NOL carryforward from 2021 to be used in 2022 $442 ($442) Balance of 2021 NOL available for carryforward after the 2022 tax year ($3,308) NOL Schedule This example is intended to highlight that the NOLD may offset income from investment capital that remains in business income due to the 8 percent of ENI limitation on gross investment income.
Taxpayer Y sustained an NOL in 2021 of ($3,750). It properly elected to waive the carryback period so the NOL is carried forward to 2022. In 2022, the gross investment income limitation reduced the amount the taxpayer was allowed to deduct as investment income from $500 to $360 (8% of $4,500). As such, $140 of income from investment capital was considered business income in 2022.
Example 3:
Example 4:
This example is intended to highlight how a separate filer carries back its NOL to previous years.
Company A, a calendar-year taxpayer, was incorporated and began doing business in New York as of 1/1/2019.
Company A had New York income and losses as follows:
NOL Schedule
2019 2020 2021 2022
Apportioned total business income after the PNOLC but before the NOLD
Business income base tax rate
Product of apportioned total business income after
$7,500,000
6.5%
$3,500,000 ($10,000,000) $2,000,000
6.5% 6.5%
PNOLC but before the NOLD and the business income base tax rate
Capital base tax
FDM
Greater of capital base tax and FDM
$487,500
$28,000
$50,000
$50,000
$227,500 $130,000
$25,000 $17,000
$50,000 $50,000
$50,000 $50,000
Difference between (a) product of apportioned total business income after PNOLC but before the NOLD and the business income base tax rate and (b) greater of capital base tax and FDM Business income base tax rate NOLD required to be utilized (if available) NOL sustained NOL carryback from 2021 to 2019 NOL carryback from 2021 to 2020 NOL carryforward from 2021 to 2022 Business income base Business income base tax $437,500 6.5% $6,730,769 ($6,730,769) $769,231 $50,000 $177,500 $80,000 6.5% 6.5% $2,730,769 $1,230,769 ($10,000,000) $6,730,769 ($2,730,769) $2,730,769 $538,462 ($538,462) $769,231 ($10,000,000) $1,461,538 $50,000 $0 $95,000

(1) (2)
Combined Group
2021 Business
Income/(Losses)
Business Loss by
Member
Member's business losses as a % of total business losses of all members with losses
Member's 2021 NOL
(2021 Total BI*(1))
L ($750) ($750) 20.0% ($700)
M ($2,000) ($2,000) 53.3% ($1,867)
N $250 $0 0.0% $0
O ($1,000) ($1,000) 26.7% ($933)
Totals ($3,500) ($3,750) 100.00% ($3,500)
Computation of the NOL for Members of a Combined Group
This example is intended to highlight how a combined group member computes its share of NOLs sustained in the loss year.
Taxpayers L, M, N & O began doing business and properly filed a combined report in New York in the 2021. As the combined group sustained an NOL, each member computes its share of the NOL as follows:
If taxpayers L, M, N, and O file a combined report in 2022, the NOL carryforward available for use by the group would be $3,500. However, if taxpayers L,M, and N file a combined report in 2022, the group would have an NOL carryforward available for use by the group of $2,567 ($700 + $1,867) and taxpayer O would have an NOL carryforward available for use of $933 on its separate return in 2022.
Example 5:
A is an unrelated separate Filer BC Group ABC Group
Corporation 2020 2020 2021
A $6,000,000 ($1,750,000)
B $1,250,000 ($1,275,000)
C $250,000 ($1,300,000)
Apportioned total business income after the PNOLC but before the NOLD $6,000,000 $1,500,000 ($4,325,000)
Business income base tax rate 6.50% 6.50%
Product of apportioned total business income (loss) after the
PNOLC but before the NOLD and the business income base tax rate $390,000 $97,500
Capital base tax $45,000 $18,000
FDM $20,000 $50,000
Greater of capital base tax and FDM $45,000 $50,000
Difference between (a) product of apportioned total business income after PNOLC but before the NOLD and the business income base tax rate and (b) greater of capital base tax and FDM $345,000 $47,500 Business income base tax rate 6.50% 6.50% NOLD required to be utilized (if available) $5,307,692 $730,769 NOL Schedule In taxable year 2020, Corporation A began doing business in New York and filed a separate New York State tax return.
Corporations B and C also became subject to tax in taxable year 2020 and properly filed a combined report. In 2021, Corporation A was purchased by unrelated group that includes corporations B and C. The newly formed combined group A, B, and C properly files a combined New York State return and sustains an NOL in 2021. Each member of the combined group must compute its share of the NOL sustained in 2021 based on its share of the loss. Corporation A may carry back its share of the 2021 loss to its separately filed 2020 return and Corporations B and C may carry back their share of 2021 losses to the 2020 combined report filed by combined group B and C.
This example is intended to highlight how a combined group member computes its share of NOLs and how the share of such NOLs is carried back to previous years.
Example 6:
A is an unrelated separate Filer BC Group ABC Group
2020 2020 2021
Corporation
A $6,000,000 ($1,750,000)
B $1,250,000 ($1,275,000)
C $250,000 ($1,300,000)
Combined Apportioned Business Income after the PNOLC but before the NOLD $6,000,000 $1,500,000 ($4,325,000) Carryback A's NOLs from 2021 to 2020 ($1,750,000) $1,750,000 Carryback B's and C's NOLs from 2021 to 2020 ($730,769) $730,769 Business income base $4,250,000 $769,231 ($4,325,000) Balance of NOL sustained in 2021 after carryback to 2020 ($1,844,231) Corporation A carried back its share of the 2021 loss of $1,750,000 to reduce its 2020 tax. As its carryback of $1,750,000 is less than the NOLD required to be utilized (if available), Corporation A completely exhausted its 2021
NOL. While Corporations B and C carried back a portion of the 2021 NOLs, the total NOL available for carryback of $2,575,000 is greater than the NOLD required to be utilized of $730,769. As such, Corporations B and C must determine their share of NOL carryback based on their share of losses in 2021. Of the $730,769 carried back to 2020, Corporation B’s share is $361,837 (1,275,000/2,575,000 *$730,769) and Corporation C’s share is $368,932 (1,300,000/2,575,000 * $730,769). Corporation B's 2021 NOL carryforward is $913,163 ($1,275,000 - $361,837) and Corporation C’s 2021 NOL carryforward is $931,068 ($1,300,000-$368,932).
NOL APPLICATION
Example 6 (continued):
Example 7:
This example is intended to highlight how NOLs are impacted by subsequent adjustments to the loss year as well as the time period for assessing deficiencies when an adjusted NOL is carried to other periods.
Corporation B sustains an NOL for the taxable year ending 12/31/2018 and on 10/15/2019 files its first amended 2015 CT-3 form to carryback the NOL of $50,000 to its 2015 taxable year ($100,000 business loss multiplied by a BAF of 50%). Corporation B receives a refund of $3,550 for the 2015 taxable year.
Based on a subsequent correction to the BAF by the taxpayer that changes its 2018 BAF from 50% to 80%, it is determined that the actual NOL for the taxable year ending 12/31/2018 was $80,000 ($100,000 business loss multiplied by a BAF of 80%). Corporation B files a second amended report for the 2015 taxable year in July 2020 to claim the additional refund for 2015.
In December 2020, the IRS completes their examination of Corporation B and makes their final determination. The IRS required Corporation B to recognize in 2018 a deferred receipt from undelivered sales. Corporation B files a second amended 2018 report timely to report the correction to its 2018 FTI and also amend its BAF since the Revenue Agent Report (RAR) directly impacted the 2018 BAF. As the RAR changed the 2018 NOLD, the Department calculates Corporation B’s proper liability for the 2015 tax year upon receiving a copy of the RAR. As a result, Corporation B owes $1,207 for the 2015 and the Department may assess a deficiency due by the authority granted under section 1083(c)(4).
Total business income before RAR
2018
Second
First
As Filed
Amended
Amended
($100,000) ($100,000) ($100,000)
Adjustment to federal taxable income due to RAR
Total business income after RAR
BAF
Business income base
$10,000
($100,000) ($100,000) ($90,000)
50% 80% 70%
($50,000) ($80,000) ($63,000)
2015
First Second Third
Original
Amended Amended Amended
Apportioned Business Income before NOLD
2018 NOL carryback to 2015
2015 business income base
$300,000 $300,000 $300,000 $300,000
$0 ($50,000) ($80,000) ($63,000)
$300,000 $250,000 $220,000 $237,000
Business income tax base current year tax rate
Business income base tax
Prepayments
Refund/Additional Tax*
7.10% 7.10% 7.10% 7.10%
$21,300 $17,750 $15,620 $16,827
$21,000 $21,300 $17,750 $15,620
$300 ($3,550) ($2,130) $1,207