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The Delaware Supreme Court on November 29 found that the Division of Revenue’s policy limiting a corporate income taxpayer’s net operating loss (NOL) deduction to the amount of its federal consolidated group’s NOL violated Delaware statutory law requiring corporate taxpayers to report as stand-alone entities.

The takeaway. Although the decision is a taxpayer-favorable outcome, a July 30, 2021, Delaware law change codifies much of the Division’s policy. The new law does not provide an effective or applicable date. Accordingly, it is uncertain to which tax years the law change will be deemed to apply. However, taxpayers that previously have been assessed tax based on the Division’s NOL limitation policy, or filed original returns based on the Division’s policy, may consider filing refund claims. Refund claims must be made by the later of three years from the last date prescribed for filing the return or two years from the time that the tax was paid.