§235-111.5  High technology; sale of unusednet operating loss carryover.  (a)  A qualified high technology business asdefined in section 235-7.3 may apply to the department to sell its unused netoperating loss carryover to another taxpayer.  If approved by the department, aqualified high technology business may sell its unused net operating losscarryover to another taxpayer in an amount equal to at least seventy-five percent of the amount of the surrendered tax benefit, computed at the corporate ratepursuant to section 235-71; provided that the qualified high technologybusiness may sell no more than $500,000 of its unused net operating losscarryover to another taxpayer per year.  In the case of partnerships, limitedliability partnerships, limited liability companies classified as partnerships,and S corporations, each partner, member, or shareholder may sell its share ofthe entity's total net operating loss.  The tax benefit purchased by the buyershall 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 orcarryforward purposes shall comply with applicable law.  The income from thesale of the net operating loss carryover received by the seller shall be reportedon its tax return in the taxable year received but shall not be consideredtaxable income.

(b)  No application for the sale of unused netoperating losses shall be approved if the seller is a qualified high technologybusiness that:

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

(2)  Has demonstrated a ratio of one hundred ten percent or greater of operating revenues divided by operating expenses in eitherof the two previous full years of operations as determined on its financialstatements; or

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

In the case of partnerships, limited liabilitypartnerships, limited liability companies classified as partnerships, and Scorporations, the application for the sale of unused net operating losses shallonly be approved to the extent that all partners, members, or shareholderscertify that they have not received a tax benefit from the losses.

(c)  As used in this section:

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

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

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