Q16-8 In late 2017 the federal tax rate for subsequent years was decreased from 35% to 21%. How would this affect an existing deferred tax liability? How would the change be reflected in net income? Q16-9 A net operating loss occurs when tax-deductible expenses exceed taxable revenues. Tax laws permit the net operating loss to be used to reduce taxable income in future profitable years. How are loss carryforwards recognized for financial reporting purposes?