A new rule from the 2017 tax laws could hurt business and be especially troublesome during a recession when they are losing money, according to Investment News.
The tax laws changed provisions around a companies’ net operating losses. Businesses used to be able to offset taxes that pay on profits with the losses they incur during another tax year. The old law would give businesses a tax refund when they incur losses for the year. So a company could get back the taxes they paid last year if they incur a large loss on the current year.
Tax experts say that the new provisions will change this rule and will probably end up hurting businesses during the next recession.
The new law doesn’t allow a company to carry losses back to previous years and only allows a carry-forward deduction to offset 80% of taxable income.
Leon LaBrecque, a financial adviser at Sequoia Financial Group, says, “You can call it a recession bomb...It's a very dramatic difference. It's almost like an extra tax."