H.F. _____ Section 1. Section 422.7, subsection 3, Code 2025, is 1 amended to read as follows: 2 3. a. Add Except as provided in paragraph “b” , add any 3 federal net operating loss deduction carried over from a 4 taxable year beginning prior to January 1, 2023. 5 b. For tax years beginning on or after January 1, 2021, 6 but before January 1, 2023, subtract, to the extent included, 7 the amount the taxpayer’s federal adjusted gross income was 8 increased during the applicable tax year by reason of the 9 application of section 461(l) of the Internal Revenue Code. 10 Sec. 2. RETROACTIVE APPLICABILITY. This Act applies 11 retroactively to tax years beginning on or after January 1, 12 2021, but before January 1, 2023. 13 EXPLANATION 14 The inclusion of this explanation does not constitute agreement with 15 the explanation’s substance by the members of the general assembly. 16 Currently, section 461(l) of the Internal Revenue Code 17 (IRC), limits excess business loss deductions for purposes of 18 federal individual income tax calculations, but allows the 19 taxpayer to carry forward any business loss amount disallowed 20 due to the limitations in section 461(l) of the IRC. For the 21 2024 tax year, any business loss exceeding $305,000 for a 22 single filer and $610,000 for married filers is disallowed but 23 the excess over the threshold amounts may be carried forward. 24 Federal net operating loss deductions carried over from a 25 taxable year beginning prior to January 1, 2023, are disallowed 26 for state individual income tax purposes. This bill specifies 27 that for tax years beginning on or after January 1, 2021, but 28 before January 1, 2023, a taxpayer may deduct any business 29 loss disallowed during the applicable tax year due to the 30 limitations in section 461(l) of the IRC. 31 The bill applies retroactively to tax years beginning on or 32 after January 1, 2021, but before January 1, 2023. 33 -1- LSB 1230YC (2) 91 jm/jh 1/ 1