When can an Illinois Net Loss Deduction (NLD) be used and what are its limitations?

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NLD can be used to reduce the base income allocable to Illinois only if the loss year return and all other returns that are impacted by the loss year carryback and carryforward provisions have been filed and to the extent the loss was not used to offset income from any other tax year. Illinois net losses are used in order of expiration beginning with the first year with taxable income after the loss year. You must file the return that generates the loss prior to claiming the loss. The return that generates the loss can be filed at any time for purposes of establishing the loss, but no credit or refund* will be issued on a return that is filed three (3) or more years past the extended due date. If you file your loss return three (3) years or more past the extended due date of the return, you will be entitled to claim the loss for NLD purposes, but you will not be entitled to a refund* or credit of any overpayment calculated on the loss return.                   

For tax years ending before 12/31/2020 and ending on or after 12/31/2022, you must complete and attach Schedule NLD, Net Loss Deduction, to calculate and document the amount of loss you are using in a tax year. If you file Form IL-1120 or Form IL-1120-X for tax years ending before 12/31/2020 and ending on or after 12/31/2022, and you are a member of a unitary business group, the unitary business group must file a combined return and complete and attach Schedule UB/NLD, Unitary Illinois Net Loss Deduction, to calculate and document the amount of loss you are using in the tax year.

For tax years ending on or after 12/31/2020 and prior to ending on 12/31/2022, Schedule NLD and Schedule UB/NLD were discontinued and were no longer required to be attached to your tax return.

Carry periods     

Limitations

The use of Illinois net losses to offset income for tax years ending on or after December 31, 2024, and before December 31, 2027, is limited to a maximum deduction of $500,000 per year for Corporations other than S corporations. This limitation does not apply to S corporations, partnerships, estates, or fiduciaries.

The use of Illinois net losses to offset income for tax years ending on or after December 31, 2021, and before December 31, 2024, and tax years ending on or after December 31, 2012, and before December 31, 2014, is limited to a maximum deduction of $100,000 per year for Corporations other than S corporations. This limitation does not apply to S corporations, partnerships, estates, or fiduciaries.

For tax years ending on or after January 1, 2011, and before December 31, 2012, the use of Illinois net losses to offset income is suspended for Corporations other than S corporations. This limitation does not apply to S corporations, partnerships, estates, or fiduciaries.

* A refund or credit may be issued on returns filed more than 3 years past the extended due date if the payment that causes the overpayment was paid within one year of the refund/credit request.

** An election to forgo the carryback period could have been made for these years; however, the election must have been made by the extended due date of the loss year return. The election was irrevocable once made.

*** December 31, 1986 is the first tax year a net loss deduction (NLD) was allowed and is the earliest date NLDs may be carried back to.

See our Business Income Tax Forms web page for access to your specific return, Schedule NLD or Schedule UB/NLD, and corresponding instructions.