We provide here a written summary of answers provided by the Department of Revenue to the committee at periodic question and answer sessions. These documents are classified as Revenue information issued for informational purposes only for the convenience of PICPA members. Pursuant to 61 Pa. Code Section 3.4, these documents should not be relied upon for any purpose or used in tax appeals. Taxpayers requiring a binding opinion on a specific fact situation may request a written letter ruling under 61 Pa. Code Section 3.3.
Q&A with the Pennsylvania Department of Revenue
Under what circumstances, if any, would PA permit or require an adjustment to an NOL carryover from a closed year being applied in an open year?
Under what circumstances, if any, would Pennsylvania permit or require an adjustment to an NOL carryover from a closed year being applied in an open year?
For example, assume company A reported losses in each of years 2001 through 2004. The losses are applied against income reported in years 2005 through 2009. In 2011, the Department conducts a review or audit of the open tax years 2007 through 2009. Would the Department audit go back into closed years 2001 through 2004 to determine if the amount of the loss generating the carryforward was correct?
Would the Department audit go back into closed years 2005 through 2006 to determine if the amount of NOL deduction utilized was correct? Would the Department adjust the loss deduction in years 2007 through 2009 to reflect any errors in such prior years? Would the answers be different for any loss years which come under jurisdiction of Act 119?
The Department will review prior years’ net losses which effect the determination of the current year’s tax.