Section 40-18-35.1

Carry forward of net operating losses.

In computing the taxable income of corporations subject to income tax as outlined in Section 40-18-35, there shall be allowed, in addition to the deductions specified therein, a deduction for the sum of the net operating losses which may be carried forward to the taxable year for which the net income of the corporation is being computed.

(1) The term "net operating loss" for the purposes of this section means the excess of the deductions (other than the deduction allowed by this subdivision) allowed by this chapter during a taxable year of the corporation over the corporation's gross income during that taxable year. For purposes of this paragraph, the corporation's gross income and allowable deductions shall be determined under the provisions of this chapter applicable to the year in which the net operating loss arises.

(2) A net operating loss shall be carried forward to the earliest subsequent taxable year in which the corporation has taxable income (determined without taking into account the deduction allowed by this subdivision). The amount of a net operating loss which may be carried to any later taxable year shall be the excess of the net operating loss over the sum of the amounts thereof deductible under this subdivision in all the taxable years preceding this taxable year.

(3) If net operating losses arising in more than one taxable year can be carried forward to a taxable year of the corporation, the net operating loss arising from the earliest of those years shall be deducted first.

(4) The net operating loss deduction allowed by this section shall be limited to sources attributable to Alabama.

(5) A net operating loss may be carried forward and deducted only during the 15 consecutive year period immediately following the taxable year in which it arose.

(6) In the case of an acquiring corporation subject to the rules of 26 U.S.C. § 381, or in the case of a new loss corporation within the meaning of 26 U.S.C. § 382, or in the case of the recognized built-in gains of a gain corporation within the meaning of 26 U.S.C. § 384, only the net operating losses as are allowable in accordance with 26 U.S.C. §§ 381, 382, and 384 shall be allowed as a deduction under this section. This subdivision shall be applied before the limitations in the preceding subdivisions are applied.

(7) Notwithstanding the foregoing provisions of this section, for a taxpayer's taxable year beginning during calendar year 2001 no deduction for any net operating loss shall be allowed or allowable. If and only to the extent that any net operating loss deduction is disallowed by reason of this subdivision, the date on which the amount of the disallowed net operating loss deduction would otherwise expire will be extended by one year. A corporation dissolved and completely liquidated within calendar year 2001 may use its net operating loss without the restrictions provided in this subdivision.

(Acts 1983, No. 83-741, p. 1214, §6; Acts 1985, No. 85-515, §17; Acts 1990, No. 90-583, p. 988, §10; Act 98-502, p. 1083, §1; Act 2001-1088, 4th Sp. Sess., p. 1095, §1.)