Cost Seg and NOL

With the recent changes in the tax law, the new net operating loss provisions now have been extended to include all business without the limitation on revenue. What this means is businesses which have generated a net operating loss in 2009, are able to carryback that loss up to 5 years. The limitation in the first carryback year is 50% of taxable income in that year. In 2008, the IRS had limits on who could use this provision with an average gross revenue of $15mm. This restriction has now been lifted and thus the rise for most business in which economic conditions have pushed small and large businesses into net operating losses, to effectively use the loss in 2009 to free up refunds plus interest on taxes paid in the 5 previous years. There are some exceptions on companies who have received TARP funds in disallowing this 5 year carryback usage. But in preparing for the 2009 tax season for your clients, when they have had taxable income in any of the previous 5 years, do not discount the fact for those owning commercial real estate, the opportunity to have a cost segregation study performed for the 2009 tax year even if your client is in or near an NOL position. If you can effectively create an NOL or push the NOL higher with accelerating depreciation deductions, the taxpayer may be able to use this to offset previous paid taxes and thus free up a refund via NOL carryback claim. It is so easy for us to say my client is losing money and they do not need any more deductions this year, but to the extent they have paid taxes in any of the previous 5 tax years do not discount the power of cost segregation to assist your client in reaping the refund benefits on taxes previously paid.