How can corporations utilize net operating losses (NOLs)?

Corporations can utilize net operating losses (NOLs) by either carrying them back to offset taxable income from prior years or carrying them forward to future years where they can also offset taxable income. This flexibility allows companies that experience a loss in one year to reduce their tax liability in profitable years, which can help stabilize their financial situation over time. The option to carry losses back is subject to certain limits, and the carryforward period has specific regulations as well, making this approach beneficial for tax planning strategies.

The ability to carry back and carry forward NOLs is specifically designed to soften the tax burden during financial downturns, providing corporations a way to recover some of the taxes paid in previous profitable years. This mechanism supports businesses by allowing them to manage their cash flow more effectively as they recover from losses.

The other options presented are incorrect because they either misunderstand the rules surrounding NOLs or mischaracterize the utility of these losses in corporate tax management. Corporations certainly can utilize NOLs, and restricting them to only one method of application does not reflect the current tax regulations.