§235-111.5  High technology; sale of unused
net operating loss carryover.  (a)  A qualified high technology business as
defined in section 235-7.3 may apply to the department to sell its unused net
operating loss carryover to another taxpayer.  If approved by the department, a
qualified high technology business may sell its unused net operating loss
carryover to another taxpayer in an amount equal to at least seventy-five per
cent of the amount of the surrendered tax benefit, computed at the corporate rate
pursuant to section 235-71; provided that the qualified high technology
business may sell no more than $500,000 of its unused net operating loss
carryover to another taxpayer per year.  In the case of partnerships, limited
liability partnerships, limited liability companies classified as partnerships,
and S corporations, each partner, member, or shareholder may sell its share of
the entity's total net operating loss.  The tax benefit purchased by the buyer
shall be claimed in the year for which the sale is approved by the department. 
Any use of the purchased net operating loss carryover for tax carryback or
carryforward purposes shall comply with applicable law.  The income from the
sale of the net operating loss carryover received by the seller shall be reported
on its tax return in the taxable year received but shall not be considered
taxable income.



(b)  No application for the sale of unused net
operating losses shall be approved if the seller is a qualified high technology
business that:



(1)  Has demonstrated positive net income in either of
the two previous full years of ongoing operations as determined on its
financial statements;



(2)  Has demonstrated a ratio of one hundred ten per
cent or greater of operating revenues divided by operating expenses in either
of the two previous full years of operations as determined on its financial
statements; or



(3)  Is directly or indirectly at least fifty per cent
owned or controlled by another corporation that has demonstrated positive net
income in either of the two previous full years of ongoing operations as
determined on its financial statements or is part of a consolidated group of
affiliate corporations, as filed for federal income tax purposes, that in the
aggregate has demonstrated positive net income in either of the two previous
full years of ongoing operations as determined on its combined financial
statements.



In the case of partnerships, limited liability
partnerships, limited liability companies classified as partnerships, and S
corporations, the application for the sale of unused net operating losses shall
only be approved to the extent that all partners, members, or shareholders
certify that they have not received a tax benefit from the losses.



(c)  As used in this section:



"Net operating loss" means a net
operating loss for income tax purposes occurring in the two taxable years
preceding the year in which the sale of net operating loss carryover occurs.



"Surrendered tax benefit" means the
tax liability saved if the net operating loss carryforward could have been used
by the qualified high technology business.



(d)  This section shall only apply to sales of
net operating loss carryovers after December 31, 2000, and before January 1,
2004. [L 2000, c 297, §3; am L 2001, c 221, §11]