Net Operating Loss Carryforwards (Section 382)
Many companies have existing net operating losses/credit carryforwards (tax attributes) or are experiencing current losses. However, under Section 382 of the Internal Revenue Code, a company’s ability to use net operating loss carryforwards (tax losses) from prior years to offset current income may be limited if the company’s 5% shareholders have increased their cumulative ownership by more than 50% during a three-year rolling period.
To maximize NOL tax savings and manage expectations, it is critical for companies to work with a business advisory firm that understands the complexities of Internal Revenue Code 382. EisnerAmper can effectively conduct or update companies’ Section 382 studies in order to determine the amount of losses/credits that are available to offset current or future taxable income. Furthermore, ASC-740 requires companies to disclose any tax attributes that it believes will not be utilized.
As much an art as a science, a Section 382 study can be more than just a determination of whether a company has undergone an ownership change. The study can also benefit companies considering a major stock issuance or transaction that would result in a change of ownership.
EisnerAmper’s Section 382 clients include many life science and technology companies, public companies or companies considering an IPO, and private equity firms that are analyzing the equity structure of a target company. Our Section 382 team works with CFOs, controllers, audit committees and shareholders to:
- Enhance Efficiency – Analyze a company’s often-detailed equity history to determine ownership changes that can impact NOL use, and perform calculations to determine the impact of any limitations.
- Save Money – Determine the optimum NOL-use scenario by forecasting the impact of net unrealized built-in gains (NUBIG) and losses (NUBIL).
- Mitigate Risk – Provide the proper NOL footnote disclosures.
- Plan Strategically – Deliver a custom, detailed report that includes methodology and findings, which can greatly aid in tax and equity planning.
EisnerAmper offers the agility, personalized attention and fee structure of a smaller company, together with the experience and knowledge of a global firm. With more than 1,500 employees, EisnerAmper can leverage expertise in other areas, such as business valuation, in order to develop a robust Section 382 study. Team members have decades of experience in these studies and have spoken and given presentations on this topic.