Florida Court Sides With Verizon, Rejects State’s Calculation of Florida NOL Limitation

A Florida appellate court has confirmed that the state’s Department of Revenue erred in calculating a company’s Florida net operating loss (NOL) limitation by applying its own interpretation rather than following state law, which closely mirrors federal law.1


In 2006 and 2011, telecommunications company Verizon acquired two entities. At the time of acquisition, both targets had substantial federal and Florida NOLs. The Department audited Verizon’s 2011-2013 tax returns and in 2017 issued a notice of proposed assessment. The parties agreed that Verizon was due a refund for taxes paid between 2005 and 2013, but they disagreed on the amount. 

At issue was how the Department calculated Florida’s NOL limitation under IRC Section 382. Verizon and the Department agreed on the IRC Section 382 annual deduction limit on Verizon’s federal tax returns, but the Department disagreed that the same limit should be used to determine the company’s state NOL deduction. Instead, it suggested that the NOL deduction should be applied for Florida purposes by apportioning the federal NOL limitation. 

Verizon filed suit, and a circuit court agreed with its argument that the Florida and federal NOL limitations are aligned. The Department appealed.


Florida’s corporate income tax rules are closely aligned with federal rules.2 Both limit an acquirer’s NOL deductions as provided in IRC Section 382. Moreover, Florida law provides that NOLs are treated “in the same manner, to the same extent, and for the same time periods” as under IRC Section 172.

Verizon relied on a plain language reading of the statute in arguing that Florida follows the federal NOL deduction limitations. The appeals court agreed, noting that the circuit court had correctly found that the Department’s rule on the subject, as well as the statutory text on which that rule was based, established that the Florida NOL deduction rule was meant to conform to the federal rule.

The appellate court rejected the Department’s “more attenuated” interpretation that annual NOL deductions must be calculated by dividing the federal limitation by the total federal NOLs of the taxpayer and multiplying it by the total Florida NOLs of the taxpayer.  The court said that under that approach, for Florida tax purposes, Verizon would lose some of its NOL deductions before the 20-year carryforward period ended. It said that aside from Florida’s treatment for carrying back NOLs, state and federal treatment aligned in the case at hand.

BDO Insights

  • Given the court’s express rejection of the Department’s alternate calculation of Florida NOL deductions, taxpayers can expect Florida courts to interpret tax laws based on a plain reading of the statute.
  • Taxpayers that apportioned the federal NOL limitation in calculating the Florida NOL limitation on previously filed returns may be entitled to refunds.  

1 Verizon Comm’n Inc. v. Fla. Dep’t. Rev., No. 1D2022-2096 (Fla. Dist. Ct. App. 2024).

2 See Fla. Stat. §220 and IRC Section 172.