Net Operating Loss Deductions
I. A deduction similar to that allowed under section 172 of the Internal Revenue Code, except as provided in subdivisions (a) and (b) and (c) of this section, may be allowable in computing entire net income for the purposes of Section 44-11-11 of the Rhode Island business corporation tax law. The Rhode Island net operating loss deduction is the same as that allowed for federal tax purposes subject to limitations:
(a) One of these limitations is that any net operating loss which may be carried forward for federal tax purposes must be adjusted to reflect the inclusions and exclusions from entire net income required by 44-11-11(a) and 44-11-11.1.
(b) The second limitation is that in any year the Rhode Island net operating loss deduction may not exceed the deduction allowable for that year for federal tax purposes under Section 172 of the Internal Revenue Code.
(c) The third limitation is that no deduction is allowable for a loss sustained during any taxable year in which a taxpayer was not subject to tax under 44-11.
(d) The fourth limitation is that such deduction for a taxable year may not be carried back to any other taxable year for Rhode Island purposes but shall only be allowable on a carry forward basis for the five (5) succeeding taxable years.
--If the Federal carry forward remains to be used for a sixth year then there would be no further Rhode Island carryforward because of the limitation of Rhode Island carryforward for five (5) succeeding taxable years.
--If the Federal Net Operating Loss is carried back, there is no Rhode Island Net Operating Loss (except to the extent any unused Federal NOL is carried forward) to be used as either a carryback or carryforward since the Rhode Island NOL is limited to a carryforward only and may not exceed the deduction allowable for that year for federal tax purposes.