The Washington Post’s lead editorial today, “Wrong Relief,” is, to put it quite simply, wrong. The premise of the opinion piece—that allowing companies to “carry back” current losses to earlier, profitable years is an “unwarranted bailout” —ignores the whole point of the so-called extended net-operating-loss provision, or NOL. The rules help smooth out swings in income (and tax payments) resulting from business cycle fluctuations and unexpected financial losses and are a godsend to businesses in cyclical industries, like manufacturing.
Under current law, companies can carry back NOLs for a two-year period and the Senate bill would increase this period to four years. Allowing companies in a downturn to “carry back” current losses to earlier, profitable years—like this provision would do—frees up funds that can be used for investment and job creation.
This is exactly what we need to get our economy back in business—more investment and job creation. Extending the NOL period is one way we can do that. In fact, an extended net operating loss carryback provision enacted in 2002 provided much needed relief to a number of manufacturers. In one case, a National Association of Manufacturers’ member company was able to reopen a plant within months after the change was enacted, in part because of the refund the company received because of the NOL provisions.
When policymakers were putting together the first stimulus package earlier this year, the NAM pushed for inclusion of an the extended NOL carryback period. We’re pleased the Senate has decided to include it in their latest effort.
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