Good news for Philly businesses: You can now carry forward net operating losses incurred in 2022 and thereafter to 20 future years. If you file and pay the City’s Business and Income Receipts Tax (BIRT) and suffer a net loss in 2022, you can deduct the loss from profits generated in later years.

This helps to reduce your business’ future BIRT income tax liabilities. Please be aware that the 20-year carryforward period ONLY applies to losses incurred in tax year 2022 and beyond. Net losses incurred before 2022 may only be carried over for three tax years. 

Previously, the carryforward period for the BIRT on income was three years. A bill passed by City Council in 2018 extended the carryforward period to 20 years, but the City could not implement the change without authorization from the State of Pennsylvania.

Deducting a loss suffered in one year from profits in future years smooths out a taxpayer’s income and losses. It reduces the tax gap that would otherwise exist between a business with stable profits and one with fluctuating profits.

This additional tax relief measure applies to all Philadelphia businesses and will significantly benefit start-ups and cyclical businesses.

No application or other submission is required to take advantage of this carryforward extension. All you need to do is properly track the carryover periods for each loss year.

For help or more information, please call (215) 686-6600.

Photo credit: @illadelphia