Section 6-3-2-2.5 - Resident persons; net operating loss; adjusted gross income(a) This section applies to a resident person.(b) Resident persons are entitled to a net operating loss deduction. The amount of the deduction taken in a taxable year may not exceed the taxpayer's unused Indiana net operating losses carried over to that year. A taxpayer is not entitled to carryback any net operating losses after December 31, 2011.(c) An Indiana net operating loss equals the sum of the following:(1) Subject to subsection (j), any separately stated net operating loss, plus each of the following, as applicable:(A) In the case of an individual, any deductions allowable in determining the separately stated net operating loss for the taxable year, but not allowable in determining federal adjusted gross income.(B) In the case of a separately stated net operating loss that results from an excess business loss (as defined in Section 461(l) of the Internal Revenue Code) for a taxable year beginning after December 31, 2022, the modifications required by IC 6-3-1-3.5, as set forth in subsection (d), that result in an increase of the taxpayer's Indiana adjusted gross income and that arise from federal deductions that resulted in the excess business loss.(C) In the case of a separately stated net operating loss not described in clause (B), the modifications required by IC 6-3-1-3.5, as set forth in subsection (d). For purposes of this clause, a modification that results in an increase to a taxpayer's adjusted gross income is considered an addition, and a modification that results in a decrease to a taxpayer's adjusted gross income is considered a subtraction. If the amount determined under this subdivision is less than zero (0), the amount is an Indiana net operating loss.
(2) Subject to subsection (j), the taxpayer's preliminary federal net operating loss for a taxable year plus the sum of the following:(A) The application of certain modifications required by IC 6-3-1-3.5 as set forth in subsection (d). For purposes of this clause, a modification that results in an increase to a taxpayer's adjusted gross income is considered an addition, and a modification that results in a decrease to a taxpayer's adjusted gross income is considered a subtraction.(B) In the case of an individual, any deductions allowable in determining the preliminary federal net operating loss for the taxable year, but not allowable in determining federal adjusted gross income. If the amount determined under this subdivision is less than zero (0), the amount is an Indiana net operating loss. If the amount determined under this subdivision is equal to or greater than zero (0), the Indiana net operating loss under this subdivision is zero (0).
(3) The excess business loss deduction disallowed under IC 6-3-1-3.5(a)(29) and IC 6-3-1-3.5(f)(14).(d) For purposes of subsection (c), the modifications that are to be applied are those modifications required under IC 6-3-1-3.5 for the same taxable year in which each net operating loss was incurred, except that the modifications do not include the modifications required under: (5) IC 6-3-1-3.5(f)(19); and(6) any modification required under Section 172(d) or Section 512(b) of the Internal Revenue Code that is also required under IC 6-3-1-3.5 in determining Indiana adjusted gross income.(e) Subject to the limitations contained in subsections (g), (h), and (i), an Indiana net operating loss carryover shall be available as a deduction from the taxpayer's adjusted gross income (as defined in IC 6-3-1-3.5) in the carryover year provided in subsection (f), but not in excess of the taxpayer's adjusted gross income (as defined in IC 6-3-1-3.5) in the carryover year determined without regard to this section.(f) Carryovers shall be determined under this subsection as follows:(1) An Indiana net operating loss shall be an Indiana net operating loss carryover to each of the carryover years following the taxable year of the loss.(2) An Indiana net operating loss may not be carried over for more than twenty (20) taxable years after the taxable year of the loss.(g) Except as provided in subsection (h), the entire amount of the Indiana net operating loss for any taxable year shall be carried to the earliest of the taxable years to which (as determined under subsection (f)) the loss may be carried. The amount of the Indiana net operating loss remaining after the deduction is taken under this section in a taxable year may be carried over as provided in subsection (f). The amount of the Indiana net operating loss carried over from year to year shall be reduced to the extent that the Indiana net operating loss carryover is used by the taxpayer to obtain a deduction in a taxable year, or as required by subsection (i), until the occurrence of the earlier of the following:(1) The entire amount of the Indiana net operating loss has been used as a deduction or reduced as required by subsection (i).(2) The Indiana net operating loss has been carried over to each of the carryover years provided by subsection (f).(h) An Indiana net operating loss that arises after the application of Section 512(a)(6) of the Internal Revenue Code shall be allowable only:(1) in a taxable year in which the trade or business that generated the federal net operating loss has an adjusted gross income greater than zero (0) as determined under IC 6-3-1-3.5; and(2) against the trade's or business's adjusted gross income; until the federal net operating loss from the trade or business has been exhausted. When the federal net operating loss from the trade or business has been exhausted, and subject to the limitations of this section, any remaining Indiana net operating loss shall be allowable against any trade or business of the taxpayer.
(i) The following rules apply to an Indiana net operating loss:(1) If the taxpayer had a discharge of indebtedness that is excluded from gross income under Section 108(a)(1)(A), Section 108(a)(1)(B), or Section 108(a)(1)(C) of the Internal Revenue Code, the Indiana net operating loss shall be reduced by the remainder of:(A) the amount of discharge of indebtedness excluded from federal gross income; minus(B) the amount of discharge of indebtedness that reduced the tax attributes under Section 108(b)(2)(D), Section 108(b)(2)(E), or Section 108(b)(2)(F) of the Internal Revenue Code or was applied for federal tax purposes under Section 108(b)(5) of the Internal Revenue Code.(2) Any reduction in an Indiana net operating loss shall be first applied to the Indiana net operating loss for the taxable year of the discharge, and then to any Indiana net operating loss carryovers.(3) The provisions of Section 108(d)(6) and Section 108(d)(7) of the Internal Revenue Code shall apply to any discharge of indebtedness for purposes of determining the reduction of net operating losses under this section.(j) The following apply for purposes of calculating an Indiana net operating loss under subsection (c): (1) An itemized deduction shall be applied first under subsection (c)(1), and any amount not applied under subsection (c)(1) to make the net operating loss equal to zero (0) shall be applied under subsection (c)(2).(2) In the case of a modification under IC 6-3-1-3.5 required to modify a separately stated net operating loss or a preliminary federal net operating loss, the amount of the modification may not exceed the amount prescribed under IC 6-3-1-3.5 and must be applied in the following order:(A) Against a separately stated net operating loss under subsection (c)(1)(B), but only to the extent necessary to increase the separately stated net operating loss, after application of subsection (c)(1)(A) and (c)(1)(B), to an amount not greater than zero (0).(B) Against a separately stated net operating loss under subsection (c)(1)(C), but only to the extent necessary to increase the separately stated net operating loss to an amount not greater than zero (0).(C) To compute a modification to a preliminary federal net operating loss under subsection (c)(2).Amended by P.L. 194-2023,SEC. 12, eff. 5/4/2023, app. to taxable years beginning after December 31, 2022.Amended by P.L. 1-2023,SEC. 2, eff. 2/22/2023, app. retroactive to 1/1/2022.Amended by P.L. 137-2022,SEC. 35, eff. 1/1/2023.Amended by P.L. 199-2021,SEC. 4, eff. 1/1/2020.Amended by P.L. 165-2021,SEC. 73, eff. 1/1/2021.Amended by P.L. 234-2019,SEC. 11, eff. 1/1/2018.Amended by P.L. 214-2018SP1,SEC. 5, eff. 5/14/2018.Amended by P.L. 86-2018,SEC. 70, eff. 3/15/2018.Amended by P.L. 239-2017,SEC. 12, eff. 7/1/2017.Amended by P.L. 172-2011, SEC. 56, eff. 1/1/2012.As added by P.L. 91-1987, SEC.3. Amended by P.L. 81-2004, SEC.10; P.L. 182-2009 (ss), SEC.192; P.L. 113-2010, SEC.55.