The requested URL /esi/header.html was not found on this server.
Additionally, a 500 Internal Server Error error was encountered while trying to use an ErrorDocument to handle the request.
Recent tax legislation passed by Congress (the “Act”) generally eliminated a corporation’s ability to carry back net operating losses (“NOLs”) to prior years1 and instead allows the NOLs to be carried forward indefinitely.
What does this mean for your M&A transaction? Often times, target corporations generate substantial deductions in the year of sale due to compensatory change of control payments and other transaction expenses, such as investment-banking fees. Prior to the Act, a target corporation with taxable income in the two taxable years preceding the year of sale could utilize an NOL arising as a result of the sale to obtain a tax refund with respect to such prior years. Since this option is no longer available, sellers may request compensation from the buyer for the value of the target’s NOL carryforward more frequently.
Here are some considerations to keep in mind:
For an in-depth discussion on these issues, please contact the authors of this alert or a member of Bryan Cave’s Tax Advice and Controversy Team:
1. NOLs related to farming and property and casualty insurance businesses generally remain subject to the pre-Act rules.