Net Operating Loss - NOL

A period in which a company's allowable tax deductions are greater than its taxable income, resulting in a negative taxable income. This generally occurs when a company has incurred more expenses than revenues during the period.

The net operating loss for the company can generally be used to recover past tax payments or reduce future tax payments. The reasoning behind this is that because corporations are required to pay taxes when they earn money, they also deserve some form of tax relief when they lose money.

If a company has a net operating loss, it can apply this tax relief in two ways: it can apply the net operating loss to its past tax payments and receive a tax credit; or it could apply the net operating loss to future income tax payments, reducing the need to make payments in future periods. The terms of the tax relief and how it can be applied varies by jurisdiction but usually the NOL can be applied to the past few years (two to three) and much more to the future (seven to 10) years.


Investment dictionary. . 2012.

Look at other dictionaries:

  • net operating loss — The excess of operating expenses over revenues. Items such as interest expenses and dividends are not considered ordinary business expenses, and, therefore are excluded in calculating the net operating loss. I.R.C. No. 172(c) …   Black's law dictionary

  • net operating loss — A tax law term for the excess of deductions, subject to certain statutory modifications, over the gross income. Mesaba Cliffs Mining Co. v Commissioner (CA6) 177 F2d 201 …   Ballentine's law dictionary

  • net operating loss carry over — A net operating loss sustained in one year used to reduce the taxable income of another year. IRC § 832(c)(10) …   Ballentine's law dictionary

  • net operating loss carrybacks — The application of losses to offset earnings in previous years. Bloomberg Financial Dictionary …   Financial and business terms

  • net operating loss carryforwards — Application of losses to offset earnings in future years. Bloomberg Financial Dictionary …   Financial and business terms

  • operating loss — See net operating loss …   Ballentine's law dictionary

  • loss — is a generic and relative term. It signifies the act of losing or the thing lost; it is not a word of limited, hard and fast meaning and has been held synonymous with, or equivalent to, damage , damages , deprivation , detriment , injury , and… …   Black's law dictionary

  • loss — The opposite of gain. Bloomberg Financial Dictionary * * * loss loss [lɒs ǁ lɒːs] noun 1. [countable, uncountable] the fact of no longer having something that you used to have, or having less of it: • loss of earnings through illness ˈjob loss… …   Financial and business terms

  • Loss Carryback — An accounting technique with which a company retroactively applies net operating losses to a preceding year s income in order to reduce tax liabilities present in that previous year. Loss carrybacks are similar to loss carryforwards, except… …   Investment dictionary

  • loss — n 1: physical, emotional, or esp. economic harm or damage sustained: as a: decrease in value, capital, or amount compare gain b: an amount by which the cost of something (as goods or services) exceeds the selling price compare …   Law dictionary

  • Loss Carryforward — An accounting technique that applies the current year s net operating losses to future years profits in order to reduce tax liability. Generally accepted accounting principles (GAAP) specify that loss carryforwards can be used in any one of the… …   Investment dictionary

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