Small Businesses Miss a Welcome Provision

As I signed my California income tax return and began to search for credit cards to finance the five-figure amount due, I pondered the fate of thousands of other small California businesses such as mine.

What is the problem? The elimination by the people working in Sacramento of a provision -- otherwise universally allowed -- called the net operating loss carry-forward.

The NOL carry-forward allowed a business that lost money in the preceding year or years to offset taxable gains in a subsequent year. But not this year or next, not in California.

In 2002, my business made a profit, though not enough to recover from losses in 2000 and 2001. Despite that, I am expected to pay the full tax due on my 2002 income as if I had not suffered losses in the previous years.

The Davis administration, starved for any cash it can find, chose to eliminate this provision, the only refuge that a small business like mine has in evening out the ups and downs of business. I get no farm subsidy, no low- or no-interest loans, to help me through the tough times. The NOL carry-forward was the only safe harbor I could count on.

Sacramento is relying upon thousands of small businesses to fund a $35-billion deficit. Unfortunately, not all of them will survive this trauma. And that could come back to haunt a state trying desperately to jump-start its economy.

Me, I’m still looking for a credit card on which to charge the tax.

Gregg K. Knowles

Bakersfield