NOLs can carry backward to generate refunds of taxes paid in previous years, and/or carried forward to offset income in future years. You can perform these calculations automatically or manually input the information.
Strategic Finance defaults the carryback period to 2 years, which reflects current U.S. tax law. You can change the length for your analysis. Strategic Finance applies NOLs first to the earliest year in the carryback period.
If the current year NOL is larger than taxable income in the earliest year, Strategic Finance applies the NOL to the second earliest year, and so on. You may have income and associated taxes in the year before you start your analysis. Strategic Finance enables you to enter a limit for the amount of income and the amount of taxes paid for a carryback to reach.
Strategic Finance assumes the income and taxes occurred in the year before the first historical year. Losses during the carryback period could generate refunds of taxes paid before the analysis starts if the carryback period goes back that far.
If you carry back all the possible NOLs and still have not used up the current year NOL (or if the carryback period is 0), Strategic Finance carries forward the NOLs to the extent of the carryforward period. Strategic Finance defaults the carryforward period to 20 years, which reflecting current U.S. tax law. You can change the length if for your model.
If you have an NOL in the year before you start your analysis, Strategic Finance enables you to enter it and carries it forward. Strategic Finance assumes the loss occurred in the year before the first historical year.
Strategic Finance only calculates refunds once per year using annual results. If you have an NOL carryback in a year detailed in quarters (negative taxable income for the whole year), the refund appears in the last quarter. If you have an NOL carryforward into a year detailed in quarters (which means taxable income for the whole year is positive), the refund only displays in the last quarter. It does not matter what happened in the last quarter. Strategic Finance only considers the year as a whole.