As a result of the recent economic recession, many corporations found themselves with unprecedented losses from investments and operations. These losses can result in the creation of tax attributes for the corporation that can be used as deductions against future profits. Corporations with such attributes have to understand the rules that limit the use of these tax attributes.

Sections 382 of the Tax Code limits the use of net operating losses (NOLs and certain other tax attributes) by corporations. These provisions apply after a corporation undergoes an ownership change (i.e., a greater than 50% increase in stock ownership over, generally, a three-year period). Corporations that have NOL carryforwards are required by regulations to determine whether they have had an ownership change.

This report discusses the rules on the limitation and use of tax attributes − carryforward and built-in items − by corporations.

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