California generally conforms to the federal provisions regarding net operating loss (“NOL”) deductions. However, California’s seemingly endless battle with budget deficits has resulted in periodic suspensions of California taxpayers’ ability – both personal and corporate – to take NOL deductions. For example, California suspended NOL deductions for the 2002 and 2003 taxable years. More recently, California generally suspended NOL deductions for the 2008 through 2011 taxable years.

Such suspensions are typically accompanied by extensions of the carryover period for NOL deductions denied in a given year, in whole or in part, because of the application of the suspension provisions to that year’s NOL. Corresponding with the most recent suspension, California extended the carryover period – set at 20 years for NOLs incurred in 2008 and later – as follows: one year for losses incurred on or after January 1, 2010 (and before January 1, 2011); two years for losses incurred on or after January 1, 2009 (and before January 1, 2010); three years for losses incurred on or after January 1, 2008 (and before January 1, 2009); and four years for losses incurred before January 1, 2008.