Ariz. Admin. Code § 15-2D-302

Current through Register Vol. 30, No. 25, June 21, 2024

Section R15-2D-302 - Corporate Net Operating Loss

A. The following definitions apply for purposes of this rule:

1. "Arizona adjusted income" means Arizona gross income of the taxpayer adjusted by the additions and subtractions as delineated in A.R.S. Title 43, Chapter 11, Article 3, except as provided in subsections (B) and (E) of this rule.

2. "Arizona gross income" means federal taxable income for the taxable year.

3. "Arizona net operating loss" means Arizona adjusted income which is a negative amount.

4. "Taxable year" means taxable year as defined in statute.

B. In calculating the Arizona net operating loss, the taxpayer shall not include:

1. An Arizona net operating loss carryforward,

2. A net operating loss incurred by the taxpayer prior to doing business in Arizona; or,

3. A net operating loss from a prior period if such loss was incurred by another corporation or group of corporations, prior to a merger, consolidation, or reorganization with the taxpayer, to the extent that Arizona adjusted income, earned after the merger, consolidation, or reorganization, is not attributable to the same entity which incurred the net operating loss.

a. A net operating loss, incurred by a separate corporation required to file a combined return, may be carried forward against that portion of the combined income which is related to the former separate corporation.

b. The portion of any combined net operating loss which is related to a separate corporation which is determined to not be includible in the unitary group may be carried forward against income of that corporation computed on a separate basis.

c. The portion of the combined income or loss which is related to the separate corporation shall be determined by computing a ratio based on the property, payroll, and sales factors of the separate corporation to the combined group's total property, payroll, and sales factors. This ratio shall be multiplied by the combined net income or loss subject to apportionment resulting in the net income or loss attributable to the separate corporation.

d. If the separate corporation operates both within and without Arizona, the Arizona portion of the separate corporation's income or loss shall be computed by multiplying the income attributable to that separate corporation by the corporation's ratio of Arizona property, payroll, and sales factors to the corporation's total property payroll and sales factors plus any income or loss allocable to Arizona.

C. An Arizona net operating loss may be carried forward to each of the 5 succeeding taxable years of the taxpayer.

1. An Arizona net operating loss, or any part thereof, which is not used during the 5 succeeding taxable years, shall be lost to the taxpayer.

2. A taxpayer shall not carryback an Arizona net operating loss.

3. Arizona net operating loss carryforwards shall be reduced by the amount of Arizona adjusted income incurred in any of the 5 succeeding taxable years.

4. For purposes of determining the 5-year carryforward limitation, each Arizona net operating loss carryover shall be applied separately to Arizona adjusted income in the order in which the Arizona net operating loss was incurred.

5. The aggregate of all Arizona net operating loss carryforwards meeting the 5-year carryforward limitation may be applied to any Arizona adjusted income incurred in a taxable year.

D. A taxpayer claiming an Arizona net operating loss carryforward shall file a statement with the corporate income tax return for the taxable year in which the Arizona net operating loss carryforward is claimed. The statement shall include a detailed schedule showing the computation of the Arizona net operating loss carryforward.

E. In calculating and applying an Arizona net operating loss, a multistate taxpayer shall be subject to:

1. The provisions of A.R.S. Title 43, Chapter 11, Article 4;

2. The statutory provisions regarding the Arizona net operating loss; and

3. The provisions of this rule.

Ariz. Admin. Code § R15-2D-302

Recodified at 6 A.A.R. 2308, filed in the Office of the Secretary of State June 2, 2000 (Supp. 00-2).