15-31-119. Net operating losses -- carryovers and carrybacks -- limit. (1) The net operating loss deduction is the aggregate of net operating loss carryovers to the tax period plus the net operating loss carrybacks to the tax period.

(2) The term "net operating loss" means the excess of the deductions allowed by this section over the gross income, with the modifications specified in subsection (6).

(3) If for any tax period ending before January 1, 2018, a net operating loss is sustained, the loss must be a net operating loss carryback to each of the three tax periods preceding the tax period of the loss and must be a net operating loss carryover to each of the seven tax periods following the tax period of the loss.

(4) A net operating loss for any tax period beginning after December 31, 2017, in addition to being a net operating loss carryback to each of the three preceding tax periods, must be a net operating loss carryover to each of the 10 tax periods following the tax period of the loss. A net operating loss carryback provided for in this subsection may not exceed $500,000 per tax period.

(5) Except as provided in subsection (11), the portion of the loss that must be carried to each of the other tax years must be the excess, if any, of the amount of the loss over the sum of the net income for each of the prior tax periods to which the loss was carried. For purposes of this subsection, the net income for the prior tax period must be computed with the modification specified in subsection (6)(b) and by determining the amount of the net operating loss deduction without regard to the net operating loss for the loss period or any tax period after the loss period, and the net income so computed may not be considered to be less than zero.

(6) The modifications referred to in subsection (2) are as follows:

(a) The net operating loss deduction may not be allowed.

(b) The deduction for depletion may not exceed the amount that would be allowable if computed under the cost method.

(c) Any net operating loss carried over to any tax year must be calculated under the provisions of this section effective for the tax year for which the return claiming the net operating loss carryover is filed.

(7) A net operating loss deduction may be allowed only with regard to losses attributable to the business carried on within the state of Montana.

(8) In the case of a merger of corporations, the surviving corporation may not be allowed a net operating loss deduction for net operating losses sustained by the merged corporations prior to the date of merger. In the case of a consolidation of corporations, the new corporate entity may not be allowed a deduction for net operating losses sustained by the consolidated corporations prior to the date of consolidation.

(9) Notwithstanding the provisions of 15-31-531, interest may not be paid with respect to a refund of tax resulting from a net operating loss carryback or carryover.

(10) The net operating loss deduction must be allowed with respect to tax periods.

(11) A taxpayer entitled to a carryback period for a net operating loss may elect to forego the entire carryback period. If the election is made, the loss may be carried forward only. The election must be made on or before the date on which the return is due, including any extension of the due date, for the tax year of the net operating loss for which the election is to be in effect. The election is irrevocable for the year made.

(12) Notwithstanding any other provision of this section, the net operating loss deduction is not allowed in the case of a regulated investment company or a fund of a regulated investment company, as defined in section 851(a) or 851(b) of the Internal Revenue Code of 1986, as that section may be amended or renumbered.

History: En. Sec. 3, Ch. 538, L. 1989; amd. Sec. 4, Ch. 278, L. 1995; amd. Sec. 1, Ch. 409, L. 2017.