Hatch Pitches Idea To Help Businesses Avoid Layoffs
Press Release
Senator Orrin Hatch (R-Utah) says a second stimulus bill that Congress is expected to undertake in January should include a boldly expanded net-operating loss (NOL) provision to help struggling businesses keep their doors open and avoid employee layoffs.
In a Dec. 16 letter to Sen. Max Baucus (D-Mont.), Senate Finance Committee chairman; and Sen. Chuck Grassley (R-Iowa), ranking Republican on the committee, Hatch noted current tax laws permit businesses that have suffered losses to recoup federal income taxes paid during profitable years by allowing them to carry back net-operating losses to previous years. NOLs typically can be carried back two years and carried forward 20 years to offset otherwise taxable income.
"For companies suffering losses, a NOL carryback can be a huge benefit, allowing them to quickly access cash in the form of a refund from the Internal Revenue Service," Hatch, a senior member on the Senate Finance Committee, stated in the letter. "However, during difficult times, many companies find that the two-year carryback period is not adequate. This is especially true for firms that have been struggling for some time."
During tough economic times, it is has been common for Congress to consider extending the NOL carryback to four or five years on a temporary basis. Hatch wants to increase the NOL carryback period to 10 or perhaps even 15 years and make the change permanent.
"The economic stimulative effect of such a change could be tremendous," Hatch wrote. "It would make more potential quick cash available to millions of companies that are currently losing money . . . Making this change on a permanent basis would provide another automatic economic stabilizer to our nation's anti-recession toolkit."
Hatch said a longer NOL carryback is a bold measure for troubled times that should cost the Treasury little over the long run, "since any refund would eventually be allowed anyway as the taxpayer applied loss carryforwards to future profitable years."
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