§40-18-25.2. Estates and trusts - Deductions from gross income of net operating loss.

(a) Nothing in Act 2006-114 shall be construed to change or otherwise affect a taxpayer's liability relating to a tax year beginning prior to the effective date of Act 2006-114.

(b) Should:

(1) any trust which is described in Section 40-18-25(b), or

(2) any business trust, as such term is defined in Section 40-18-1(1),

which is classified as a disregarded entity for federal income tax purposes, be taxed separately from its owner or owners during tax years prior to the effective date of Act 2006-114, any net operating loss of such trust existing on December 31, 2004, shall be allowed as a deduction from the gross income, or net income, of the owner or owners of the trust in a tax year beginning after December 31, 2004.

(c) The deduction allowed in subsection (b) to the owner or owners of the trust shall be in an amount not to exceed the greater of the following amounts:

(1) the amount which is equal to the net income generated by the trust during the tax year; or

(2) the amount which is equal to one tenth of the loss existing on December 31, 2004.

(d) A trust's loss existing on December 31, 2004, shall be allowed to the owner or owners pursuant to subsection (b) during the time period which is the shorter of the 10 tax years beginning on or after January 1, 2005, or until such time as all such net operating loss has been deducted by the owner or owners of the trust.

(e) The net operating loss provisions applicable to the owner or owners shall be applied to the loss which is deductible by the owner or owners, except that no loss shall be carried back to prior years to the extent that the loss arises because of the operation of this section.

(f) Act 2006-114 shall not be relevant to or otherwise considered in determining a taxpayer's liability for tax years beginning prior to the effective date of Act 2006-114.

(Act 2006-114, p. 173, §4; Act 2007-147, p. 180, §1.)