1. (a) Arkansas has adopted I.R.C. § 170 as referenced in Arkansas Code § 26-51-419.

2. (b)

   1. (1) I.R.C. § 170(d)(2)(B) does not allow unused contributions to increase NOL carry forward.
   2. (2) It merely decreases net taxable income by current year contributions first, then any accumulated contribution carryforwards up to a ten percent (10%) limitation.
   3. (3) This decreases the amount of NOL used and increases the NOL available for future years. Example:

      	1989	1990	1991	1992	1993	1994	1995
      Income	$107,000	$107,000	$107,000	$108,000	$110,000	$ 80,000	$150,000
      Deductions Excluding Amortization & Charitable Deductions	105,000	105,000	105,000	105,000	105,000	105,000	105,000
      Taxable Income Before Amortization, Charitable Deductions and NOL	2,000	2,000	2,000	3,000	5,000	(25,000)	45,000
      Amortization of Organizational Expenditures	(2,000)	(2,000)	(2,000)	(2,000)	(2,000)	0	0
      Charitable Deductions Allowed	0	0	0	(100)	(300)	0	(4,500)
      Taxable Income (Loss) before NOL	0	0	0	900	2,700	(25,000)	40,500
      Net Operating Loss 0 0	0	0	0	0	(25,000)
      Taxable Income (Loss) 0 0	0	900	2,700	(25,000)	15,500
      Taxable Income Before Amortization, Contributions and NOL	2,000	2,000	2,000	3,000	5,000	(25,000)	45,000
      Organizational Expenses	(2,000)	(2,000)	(2,000)	(2,000)	0	0	0
      Contribution Limitation Base	0	0	0	1,000	3,000	N/A	45,000
      Limitation	X .10	X .10	X .10	X .10	X .10	N/A	X .10
      Contributions Allowed	0	0	0	100	300	N/A	4,500

      LIMITS ON CHARITABLE CONTRIBUTIONS

      Year	Contributions	Utilized Current Year Limit	Current Year Balance	Prior Years Contribution Utilized	Year End Cumulative Carryforward	expired
      1989	1,000	0	1,000	0	1,000	0
      1990	1,000	0	1,000	0	2,000	0
      1991	1,000	0	1,000	0	3,000	0
      1992	1,000	100	900	0	3,900	0
      1993	1,000	300	700	0	4,600	0
      1994	1,000	0	1,000	0	4,600	1,000*
      1995	1,000	1,000	0	3,500	1,100	0

      Southern Arkansas Timber, Inc. started business on January 1, 1989. Organization expenses amounted to ten thousand dollars ($10,000). Amortization of organization expenditures is deducted before the ten percent (10%) limit is allowed. Any unused charitable contributions cannot be added to NOLs when they expire. * Contribution carryover from 1989 expired at the end of 1994, as shown in chart. For charitable contributions for consolidated filers, refer to Arkansas Code § 26-51-805(f).

Codification Notes: “NOL” means net operating loss. I.R.C. § 170(d)(2)(B) is codified at 26 U.S.C. § 170(d)(2)(B).