Net operating loss

Under U.S. Federal income tax law, a net operating loss (NOL) occurs when certain tax-deductible expenses exceed taxable revenues for a taxable year. If a taxpayer is taxed during profitable periods without receiving any tax relief (e.g. a refund) during periods of NOLs, an unbalanced tax burden results. Consequently, in some situations, Congress allows taxpayers to use the losses in one year to offset the profits of other years. This provision is achieved through the carryback (as far back as 5 years per section 1211 of the American Recovery and Reinvestment Act of 2009) and carryforward of NOLs.