Section 4.1 The Elusive NOL

• Jurisdiction: United States

4.1 The Elusive NOL

A tax advisor must consider preservation of net operating loss (NOL) carry-forwards to reduce post-confirmation income, as well as the impact of a change in ownership as a result of a reorganization, which may severely limit the post-confirmation use of the NOLs under Internal Revenue Code § 382. In a related vein, counsel should analyze the impact of the automatic stay on post-petition stock transfers that may have an impact on the NOL.⁵² To the extent NOLs are available, the post-confirmation company can pay back debt principal out of pre-tax as opposed to after-tax dollars.

The newly enacted Tax Cuts and Jobs Act was signed into law on Dec. 22, 2017, and provides major changes to the utilization of NOLs, including the new 80 percent limitation, which limits the utilization of NOLs to 80 percent of taxable...