So much for “so far, so good.” A slate of business tax breaks in the stimulus bill that had “emerged relatively unscathed” from the Senate debates (as I wrote in my last post) took a body blow late Wednesday when House and Senate negotiators scrapped a provision that would have extended the carryback period for net operating losses from the 2 years allowed under current law to 5 years.

Both the Senate-passed and the House-passed versions of the recovery bill had contained the NOL proposal, which would have enabled companies to claim some $68 billion in refunds over 2 years.

But the tax break fell victim to Congress’s determination to keep the tab for the final package under $800 billion. The NOL carryback provision was “a casualty of the overall limit,” according to Senate Finance Committee chairman Max Baucus, as quoted in this Bloomberg report.

However, the bill that will likely land on President Obama’s desk will contain a NOL carryback extension for small businesses with receipts of under $15 million — a sure sign that Congress bought the argument that the original proposal would fail to create jobs. Several other provisions of the bill target the small-business “engine of the economy,” including an increased exclusion for individuals on gain from the sale of certain small business stock and an extension of the 2008 increase in small business expensing to 2009.

President Obama spent much of yesterday touting the benefits that machinery giant Caterpillar could expect from the stimulus package. But for large organizations in industries that are less shovel-intensive than Caterpillar’s, the incentives in the legislation now look decidedly anemic. ###