Income taxes: net operating losses: businesses.
If enacted, AB 2065 will significantly alter the landscape of business taxation in California by establishing mechanisms for businesses that can demonstrate substantial asset sales and recognize losses to retroactively offset taxes paid in previous years. This carryback provision is expected to alleviate immediate financial burdens on businesses that suffered during the pandemic, permitting them to access funds by obtaining tax refunds from the years prior to 2023. Moreover, the bill is designed to expire by December 1, 2025, underscoring a temporary relief initiative that seeks to balance state revenue needs while offering necessary support to struggling businesses.
Assembly Bill 2065, introduced by Assembly Member Blanca Rubio, aims to provide economic relief to businesses affected by the COVID-19 pandemic by allowing certain taxpayers to carry back their net operating losses (NOLs) for tax relief. This legislation responds to the impact of prior restrictions on NOL deductions, which were suspended for the 2020, 2021, and parts of 2022 fiscal years under previous laws. The bill sets forth provisions to carry back these losses to offset taxable income for the tax years immediately preceding the loss, specifically targeting businesses that could not utilize these deductions due to the economic downturn associated with the pandemic.
The sentiment around AB 2065 appears supportive among business advocates who argue that the bill provides vital assistance for economic recovery in the wake of the pandemic. Proponents emphasize that allowing companies to access previously paid taxes can help them stabilize operations and rehire workers. However, some criticism exists regarding the clarity of what constitutes a 'qualified taxpayer' and the potential implications for state revenue in the short term as these carrybacks may lead to significant reductions in tax income following the procedural changes introduced by this bill.
Notable points of contention regarding AB 2065 involve discussions on the equity of such tax benefits, especially for larger businesses versus small enterprises. Questions have arisen about whether the relief mechanisms favor larger corporations that are more capable of meeting the criteria for substantial sales or asset transfers. Furthermore, skepticism about the financial impact on state budgets persists, as allowing retroactive claims may reduce the tax income essential for funding public services, amplifying the debate on the long-term fiscal responsibilities of the state post-pandemic.