CARES Act: International Tax Implications of NOL Rule Changes

Aug 13, 2019
Tax and Accounting

Welcome to Life Designers, your trusted source for business and consumer services consulting and coaching. In this article, we will explore the international tax implications of the NOL (Net Operating Loss) rule changes under the CARES Act. Our team of experts at Life Designers understands the complexities of the tax landscape and can guide you through the intricacies of this important legislation.

The CARES Act and NOL Rule Changes

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, enacted in response to the global COVID-19 pandemic, introduced several significant changes to the tax code. One such change relates to the treatment of NOLs, which are a valuable tax asset for businesses. Previously, under the Tax Cuts and Jobs Act (TCJA), NOLs were subject to limitations on their utilization. However, the CARES Act temporarily suspended these limitations, offering much-needed relief to businesses.

Understanding Net Operating Losses (NOLs)

Before we dive into the international tax implications, let's briefly understand what NOLs are. NOLs occur when a business's allowable tax deductions exceed its taxable income, resulting in a negative taxable income amount. This loss can be carried back or carried forward to offset taxable income in other years, thereby reducing tax liability.

Prior to the CARES Act, the TCJA introduced a provision that limited the utilization of NOLs to 80% of taxable income, with no option for carryback. This change had a significant impact on businesses, especially those with international operations.

International Tax Implications

Foreign Tax Credit Limitation

For businesses with international operations, the foreign tax credit is an essential tool to prevent double taxation. Under the previous NOL rules, the limitation on NOL deductions impacted the foreign tax credit limitation calculation. This limitation could result in the inability to fully utilize foreign tax credits, potentially increasing tax liability.

However, with the temporary suspension of the NOL limitation under the CARES Act, businesses can now fully utilize NOLs to offset taxable income, including both domestic and foreign-sourced income. This change provides businesses with increased flexibility in managing their international tax obligations and reduces the risk of double taxation.

Transfer Pricing Considerations

Transfer pricing is a critical aspect of international tax planning, ensuring that transactions between related entities are conducted at arm's length. With the NOL rule changes, businesses need to reassess their transfer pricing strategies. The increased availability of NOLs may impact the profitability of specific entities within a multinational group, potentially affecting the allocation of taxable income across jurisdictions.

It is crucial for businesses to carefully analyze their transfer pricing policies in light of the NOL rule changes and ensure compliance with applicable tax laws. Life Designers can assist you in developing effective transfer pricing strategies that align with your international tax objectives.

Expert Consulting and Coaching Services

At Life Designers, we offer expert consulting and coaching services in business and consumer services. Our team of seasoned professionals possesses in-depth knowledge of the CARES Act and the international tax implications it entails. We understand that every business is unique, and we tailor our solutions to meet your specific needs.

We work closely with our clients, providing comprehensive guidance on a wide range of topics, including tax planning, compliance, and risk mitigation. Whether you need assistance in navigating the intricacies of international tax rules or want to optimize your business operations, our experts at Life Designers are here to help.


The international tax implications of the NOL rule changes under the CARES Act are significant for businesses operating across borders. Understanding these implications is crucial to effectively manage tax liabilities and optimize business performance. By partnering with Life Designers, you gain access to a team of experts who can guide you through the complexities of the tax landscape, help you develop effective strategies, and ensure compliance with applicable regulations.

Contact Life Designers today to learn more about our consulting and coaching services and how we can assist you in navigating the international tax implications of the NOL rule changes under the CARES Act. Let us help you achieve success in your business endeavors.