Kentucky Schedule NOL is the Net Operating Loss Schedule used by certain corporations filing Kentucky Form 720. The schedule helps a corporation calculate how much net operating loss deduction, also called NOLD, can be used for the current tax year and how much unused net operating loss can be carried forward to the next year. It separates older pre-2018 NOL carryforwards from post-2017 NOL carryforwards because Kentucky applies different rules to each category. Pre-2018 NOL amounts generally come from tax years beginning before January 1, 2018, and may be carried forward for 20 years after the loss year. Post-2017 NOL amounts come from tax years beginning after December 31, 2017, and may only reduce up to 80 percent of taxable income, but unused amounts may be carried forward indefinitely. Kentucky NOLs are calculated after apportionment, so the schedule is important for corporations with Kentucky activity, prior-year losses, subsidiaries, or elective consolidated return reporting. Companies filing unitary combined returns should not use this schedule. Those groups use the required unitary combined return schedule for NOL calculations instead.
How To File Kentucky Schedule NOL
Attach Kentucky Schedule NOL to Kentucky Form 720 when the corporation is claiming a net operating loss deduction or reporting a remaining NOL carryforward. Complete the corporation identification fields first, then list the corporation filing the return and any subsidiaries if the return is an elective consolidated return. Enter pre-2018 NOL carryforwards in Column A and post-2017 NOL carryforwards in Column B. Complete Section A to calculate the NOL deduction used for the current year. Complete Section B to calculate the remaining NOL carryforward to 2026. The total NOL deduction from Section A, line 10 must also be entered on Form 720, Part I, line 42.
How To Complete Kentucky Schedule NOL
Header Information
Line 1: Federal Identification Number
Enter the corporation’s Federal Employer Identification Number. Make sure the number matches the FEIN used on Kentucky Form 720.
Line 2: Kentucky Corporation/LLET Account Number
Enter the corporation’s Kentucky Corporation or LLET account number. The number must be 9 digits. If the account number has only 6 digits, add zeros at the beginning to make it 9 digits.
Line 3: Name Of Corporation
Enter the legal name of the corporation filing Kentucky Form 720. Use the same name shown on the main return.
Line 4: Prior Year NOL Pre-2018 NOL Carryforward
Use this column for NOL carryforward amounts from tax years beginning before January 1, 2018.
Line 5: Prior Year NOL Post-2017 NOL Carryforward
Use this column for NOL carryforward amounts from tax years beginning after December 31, 2017.
Section A, Net Operating Loss Deduction
Line 1: Corporation Filing Return
Enter the name and Kentucky Corporation/LLET account number for the corporation filing the return. If the return is an elective consolidated return, enter the common parent’s name and Kentucky account number. Also enter the corporation’s pre-2018 NOL carryforward in Column A and post-2017 NOL carryforward in Column B, if applicable.
Line 2: Subsidiaries If Applicable
Use this section only when subsidiaries are included, such as on an elective consolidated return. Enter each subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward in Column A, and post-2017 NOL carryforward in Column B.
Line 2(a): First Subsidiary
Enter the first subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(b): Second Subsidiary
Enter the second subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(c): Third Subsidiary
Enter the third subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(d): Fourth Subsidiary
Enter the fourth subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(e): Fifth Subsidiary
Enter the fifth subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(f): Sixth Subsidiary
Enter the sixth subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(g): Seventh Subsidiary
Enter the seventh subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(h): Eighth Subsidiary
Enter the eighth subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 2(i): Ninth Subsidiary
Enter the ninth subsidiary’s name, Kentucky Corporation/LLET account number, pre-2018 NOL carryforward, and post-2017 NOL carryforward.
Line 3: Adjustments
Enter any adjustments to the amounts listed in Column A and Column B. This may include intercompany eliminations or other required corrections that affect the reported NOL carryforward amounts.
Line 4: Totals
Add each column separately. Enter the total pre-2018 NOL carryforward in Column A and the total post-2017 NOL carryforward in Column B.
Line 5: Taxable Net Income From Form 720
Enter the taxable net income from Form 720, Part I, line 41. If Form 720, Part I, line 41 shows a loss instead of income, do not complete lines 6 through 10 in Section A. Go to Section B and enter the current-year loss as a positive number on Section B, line 5.
Line 6: Pre-2018 NOL Deduction Used This Year
Enter the smaller amount between Section A, line 5 and Section A, Column A, line 4. This is the pre-2018 NOL deduction used for the current tax year.
Line 7: Taxable Income Remaining After Pre-2018 NOL Deduction
Subtract line 6 from line 5. This shows the taxable income remaining after applying the available pre-2018 NOL deduction.
Line 8: Maximum Allowable Post-2017 NOL Deduction
Multiply line 7 by 80 percent. This is the maximum post-2017 NOL deduction allowed for the current tax year.
Line 9: Post-2017 NOL Deduction Used This Year
Enter the smaller amount between line 8 and Section A, Column B, line 4. This is the post-2017 NOL deduction used for the current tax year.
Line 10: Total NOL Deduction
Add line 6 and line 9. This is the total NOL deduction used for the current tax year. Enter this amount on Schedule NOL, Section A, line 10 and also on Form 720, Part I, line 42.
Section B, NOL Carryforward
Line 1: Pre-2018 NOL Carryforward Before Current-Year Use
Enter the amount from Section A, Column A, line 4. This is the total available pre-2018 NOL carryforward before subtracting the amount used this year.
Line 2: Pre-2018 NOL Used This Year
Enter the amount from Section A, line 6. This is the pre-2018 NOL deduction applied to the current tax year.
Line 3: Pre-2018 NOL Carryforward To 2026
Subtract line 2 from line 1. This is the remaining pre-2018 NOL carryforward available for 2026, subject to the applicable carryforward period.
Line 4: Post-2017 NOL Carryforward Before Current-Year Changes
Enter the amount from Section A, Column B, line 4. This is the total available post-2017 NOL carryforward before adding any current-year loss or subtracting the amount used this year.
Line 5: Current-Year Loss From Form 720
Enter the current-year loss from Form 720, Part I, line 41 as a positive number. Complete this line only when the current year produced a loss.
Line 6: Post-2017 NOL Used This Year
Enter the amount from Section A, line 9. This is the post-2017 NOL deduction applied to the current tax year.
Line 7: Post-2017 NOL Carryforward To 2026
Add line 4 and line 5, then subtract line 6. This is the remaining post-2017 NOL carryforward available for 2026.
Important Kentucky NOL Rules To Remember
Pre-2018 NOL carryforwards and post-2017 NOL carryforwards must be tracked separately. Pre-2018 NOL amounts may generally be carried forward for 20 years after the loss year. Post-2017 NOL amounts may be carried forward indefinitely, but they may only offset up to 80 percent of taxable income in a tax year. Kentucky does not allow NOL carrybacks for tax years beginning on or after January 1, 2005. A corporation does not have a Kentucky NOL carryforward for a year in which it did not have Kentucky nexus. For all filers, Kentucky NOLs are calculated on a post-apportionment basis.