The Colorado Department of Revenue, Division of Taxation, convened a workgroup meeting on December 7, 2021, to discuss drafts of income tax rules regarding Colorado net operating losses.
After that discussion, the Division has made additional revisions to the draft rule regarding net operating losses for corporations and is seeking input from stakeholders regarding the revised draft. The revisions include the following:
- additional clarification regarding net operating losses of affiliated groups of C corporations filing combined, consolidated, combined-consolidated, or separate returns;
- clarifying revisions relating to nonapportionable income;
- a new provision regarding the application of the rule to net operating losses arising prior to 2019;
- additional clarification regarding carryforwards and the tax year(s) to which they may be applied;
- additional paragraphs stating that the net operating loss deduction is limited to Colorado taxable income before the deduction, in addition to other limitations;
- several additional paragraphs regarding the application of the SRLY limitation to Colorado net operating losses;
- clarification regarding the application of the limitation in IRC section 860E to Colorado net operating losses;
- rearrangement of certain parts of the draft rule; and
- additional clarifying revisions.
The revised redline draft showing the revisions made after the workgroup meeting can be accessed through the following hyperlink:
- Rule 39-22-504-2. Colorado Net Operating Losses for C Corporations.
We do not plan to convene another workgroup meeting for this rule prior to formal rulemaking, but would welcome written feedback on the revised draft rule. Please submit comments on the draft rule by emailing your comments to email@example.com. Written comments will be accepted through November 4, 2022.
We would appreciate your feedback to help us measure and improve the success of the rulemaking program. If you participate in the rulemaking process, we invite you to complete a short survey. Follow the link, and choose the "I participated in the Rulemaking Process (Announcement, Stakeholder Meeting, or Hearing)" option.