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California S.B. 167 adds corporate tax and personal income tax statutes which suspend the use of NOLs for most California taxpayers for tax years beginning in 2024-2026 unless they qualify for limited small business exceptions. To the extent that the NOL utilization is suspended by the new statutes, a corollary extension of the NOL carryover period is provided for each year of disallowance. For purposes of the corporate tax, the NOL suspension does not apply if the taxpayer has income subject to corporate tax of less than $1 million for the taxable year. For personal income tax purposes, the NOL suspension does not apply if a taxpayer has either “net business income” or “modified adjusted gross income” of less than $1 million for the taxable year.
As amended by S.B. 175, the NOL suspension for corporate tax and personal income tax purposes will not apply for the 2025 and 2026 tax years if the California Director of Finance determines that the general fund money over the multiyear forecast is sufficient without the revenue from the NOL suspension and credit limitation, and there is legislation in the annual Budget Act to not apply these provisions.
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