What is a primary benefit of carrying back net operating losses (NOLs)?

Carrying back net operating losses (NOLs) allows a company to apply its current losses against taxable income from previous years, potentially resulting in an immediate tax refund. This option provides immediate liquidity to the business by recuperating cash that was previously paid in taxes. The benefit of an immediate tax refund can be particularly vital for businesses experiencing financial distress, as it provides them with necessary capital to invest back into operations or manage their financial obligations more effectively.

While reducing future taxable income can be an advantage, it does not offer the immediate cash benefit that carrying back NOLs does. Improving current financial statements may be a consequence of tax benefits, but this is not the primary intent of NOL carrybacks. Similarly, while NOLs can have an indirect effect on stock prices, this is not guaranteed and is not the primary purpose of the NOL carryback provision. Thus, the immediate tax refund from past payments stands out as the most significant advantage of carrying back NOLs.