Alternative net tax operating loss (ATNOL)

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What is the operating loss net of alternative tax (ATNOL)?

Alternative tax net operating loss (ATNOL) is the excess of allowable deductions over income recognized for alternative minimum tax (AMT) purposes. It is calculated in the same way as net operating losses (NOL), but with additional rules covering deductions, exclusions and preferences related to AMT.

Key points to remember

  • The net operating loss from the alternative tax (ATNOL) is a consideration for the calculation of a net operating loss when it is subject to the alternative minimum tax (AMT).
  • The AMT ensures that certain taxpayers pay a minimum “fair share” by excluding or limiting certain deductions and credits for eligible individuals and businesses.
  • ATNOL will thus take into account the limited tax deductions authorized when calculating the net operating loss, showing the net loss for tax purposes lower.

Understanding the operating loss net of alternative tax

A net operating loss (NOL) is a loss sustained during a period when a business’s allowable tax deductions are greater than its taxable income. When more expenses than income are incurred during the period, the company’s net operating loss can generally be used to recover past tax payments. This is because NOL can be used to offset positive taxable income, reducing taxes payable.

When companies reach a certain size, they may become subject to an alternative minimum tax. A business subject to the Alternative Minimum Tax (AMT) will benefit from a limited number of deductions. For example, he will not be allowed to deduct national and local taxes from his income, and all miscellaneous itemized deductions are denied. However, if the business has a net operating loss, it can defer its NOL up to 80% of the AMT taxable income. That is, he can deduct up to 80% of the loss from his income under AMT rules.

While an NOL is the excess of a taxpayer’s deductions over his gross income, an operating loss net of alternative tax (ATNOL) is the excess of a taxpayer’s allowable deductions in determining AMT income. on the income that is included in the calculation of the taxpayer’s alternative taxable minimum. income, calculated with the modifications of Article 172 (d) of the Code. Section 56 of the Internal Revenue Code (Title 26) allows taxpayers to replace net operating loss with ATNOL when calculating alternative minimum tax.A taxpayer who calculates the amount of the alternative minimum tax must claim the deduction for net operating loss of the alternative tax. The amount of ATNOL deductible in the calculation of AMT income cannot exceed 80% of the obligation.

ATNOL Conditions and Restrictions

If the ATNOL deduction exceeds this limit, it can be carried forward, but the ATNOL limit will still apply to the year carried forward. Unlike the standard NOL deduction, however, the alternative deduction for net operating loss does not allow an entity to account for many common expenses, such as capital costs, local and state taxes paid by the company. business and accelerated depreciation of equipment and other commercial property.

Only in years when a company is subject to AMT rules, the ATNOL rules will also apply. When filing ATNOL, taxpayers fill out forms 1045 and 6251.


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