Smaller NOLs for Two More Years
As part of the final amendments to the Inflation Reduction Act of 2022 (IRA), Senator Thune had proposed extending the limit on the State and Local Tax Deduction (SALT) for one year. However, Senator Warner was able to eliminate this proposal and replace it with a two-year extension of the Excess Business Loss (EBL) provisions.
The EBL only allows farmers and other taxpayers to offset farm or business losses against $250,000 of other income ($500,000 for married couples). Both of these amounts are indexed to inflation.
This means that the largest Net Operatin Loss (NOL) that farmer can carry back two years to offset income in those years is limited to these amounts through 2028. It was originally 2025, then extended one year last year and now two more years.
It appears that the Republicans had planned on using this extension of the EBL to help allow a permanent extension of the Section 199A 20% deduction when they get in power. This ability has now been substantially muted. It is likely at some point that the EBL rules will become permanent and may be strengthened since both parties seem to like the provision.
The IRA has not passed yet but likely will be signed this Friday. We will keep you posted.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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