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. Calculating the NOL amount The NOL amount is the amount of the loss from the current year that can be carried forward to future years or, in certain instances, carried back to prior years. Individuals For individuals, the NOL amount is generally the excess of deductions over income from the operation of a business. The following items are excluded when calculating the NOL amount: net capital losses, i.e., capital losses in excess of capital gains; (net capital gains are included) nonbusiness deductions in excess of nonbusiness income; (net nonbusiness income is included) In addition, the NOL amount excludes other adjustments such as: Section 1202 exclusion of the gain from the sale or exchange of qualified small business stock (QSBS) NOL deduction from other tax years domestic production activities deduction Corporations For corporations, an NOL is the excess of the deductions allowed over gross income with the following adjustments. no NOL deduction no Section 199 domestic production activities deduction the dividends received deductions for dividends received are computed without regard to Section 246(b) limit the dividends paid deduction is computed without regard to the limitation under Section 247(a)(1)(B). Loss carryback and carryforward mechanisms The Tax Cuts and Jobs Act of 2017 eliminated the net operating loss carryback and changed the use of carryforwards. This provision was enacted in order to defray the overall cost of the legislation. The Joint Committee on Taxation estimated the changes would raise $201 billion from 2018 to 2027. Carryforwards can now be used for an unlimited time period as opposed to the previous 20-year limit. However, NOLs can no longer completely eliminate a taxpayer's income. The NOLs used in any one year is limited to 80% of taxable income. In 2020, as a result of the economic fallout of the COVID-19 pandemic in the United States, the CARES Act was passed which temporarily and retroactively changed the NOL rules for the tax years between 2018 and 2020. Specifically, NOLs from 2018, 2019, and 2020 could be carried