Limitations on Corporate Tax Attributes: An Analysis of Section 382 and Related Provisions
Linked on this site is the 2026 edition of Lee G. Zimet’s paper entitled “Limitations on Corporate Tax Attributes: An Analysis of Section 382 and Related Provisions.” The paper contains a comprehensive discussion of corporate tax attributes and the various limitation rules.
As a result of the recent upheaval in the economy (e.g., on-again, off-again tariffs and the effects of military activity), many corporations find themselves with unprecedented losses from investments, operations, and debt financing. Many economically profitable businesses also find themselves with tax losses due to the ability to deduct domestic research and experimental costs (including software development costs), as well as equipment costs under the bonus depreciation rules and Section 179.
These losses can create tax attributes that can be used as deductions against past or future profits. Corporations with such attributes need to understand the complex rules that apply and the limits on their use.
This paper discusses the rules on the limitation and use of tax attributes (carryforwards and built-in items) by corporations. The bulk of the paper discusses the limitation rules of Section 382 of the Internal Revenue Code of 1986, as amended (the ‘Code’), which limit the use of tax attributes after an ownership change. The paper also discusses the other rules that can limit a corporation’s use of its tax attributes (or their usefulness).
Sections 382 and 383 together limit 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., more than a 50 percent increase in stock ownership over, generally, a three-year period). The limitation is generally based on the value of the stock of the corporation before the ownership change multiplied by the long-term tax-exempt rate, which is published monthly by the Internal Revenue Service.
Section 384, which shares many concepts with Sections 382 and 383, limits the use of NOLs (and certain other tax attributes) by corporations. This provision applies where a corporation acquires the stock or assets of another corporation.
The separate return limitation year (SRLY) limitation rules restrict a consolidated group’s ability to utilize NOLs (and certain other tax attributes) when a member joins or departs the group. The SRLY rules share concepts with Sections 382 and 383, and may apply either in lieu of or in addition to those provisions.
Highlights of the 2026 edition include:
- 2025 Tax Act – On July 4, 2025, the One Big Beautiful Bill Act (OBBB Act) was enacted into law. The OBBB Act made major changes to rules that impact corporate tax attribute, including:
- Extensive changes to the limits under section 163(j) on the deduction of business interest expense.
- Extensive modifications to the global intangible low taxed income (GILTI) and foreign-derived intangible income (FDII) rules (including a name change).
- Modification of the tax rate under the base erosion and anti-abuse tax (BEAT).
- A new one-percent floor on charitable contribution deductions.
- Substantial changes to many energy-related tax credits.
- CAMT – A new corporate alternative minimum tax (CAMT), based on book income, was enacted as part of the Inflation Reduction Act of 2022 (IRA). In September 2024, Treasury and the IRS issued comprehensive proposed regulations; however, in October 2025, they announced a partial withdrawal. Notwithstanding the partial withdrawal, taxpayers may currently rely on the proposed regulations. Other guidance was issued throughout 2025 and early 2026, and a new set of proposed regulations is expected in early 2027. The paper describes the existing guidance, as well as how corporate tax attributes (i.e., net book losses, foreign tax credits, and general business credits) can be applied against the CAMT and the potential limitation on their use. The CAMT rules are described on pages 36-83.
- Global Minimum Tax (Pillar Two) – Starting in 2024, certain large multinational enterprises with a US subsidiary or branch can be subject to foreign taxes if they are not subject to a minimum tax of at least 15% in the United States (taking into account federal, state, and local income taxes) on their US profits. This tax regime was recently renamed the Global Minimum Tax, but many still refer to it as Pillar Two. Several sets of important guidance were issued in 2025 and 2026, including a Side-by-Side provision that generally exempts US multinational enterprises from the tax (but not US subsidiaries or branches of foreign enterprises). The paper describes how foreign taxes could be applied to subject undertaxed US profits to tax in a foreign country. Such a tax could limit the efficacy of certain US tax attributes. The Global Minimum Tax rules are described on pages 83-110.
- Built-in Gains and Losses – Section 382 includes special rules for corporations that undergo an ownership change and have a net unrealized built-in gain or loss (NUBIG or NUBIL). A NUBIG is beneficial as the limit can be increased by recognized built-in gains (RBIGs). A NUBIL can be detrimental as recognized built-in losses (RBILs) can be subject to limitation. In 2019, Treasury and the IRS issued comprehensive proposed regulations; however, in July 2025, they announced a full withdrawal. We understand that preparing a new set of guidance is a top priority for the IRS. The section 382 built-in gain and loss rules are described on pages 266-308.
- Protecting and Monetizing Tax Attributes – Corporate tax attributes can be valuable assets. Their value can be protected by purchasing tax insurance. Another way to protect value is to prevent or mitigate the risk of an ownership change under Section 382 (through a poison pill or similar legal restrictions). The value of certain tax attributes can also be transferred to a third party by means of a tax receivables agreement (TRA). Lastly, the benefits of certain tax credits can be transferred to third parties for cash. The ability to protect and/or monetize tax attributes is described on pages 150-55 and 192-95.
- Section 269 – Section 269 can be used by the IRS to limit (or eliminate) the benefits of NOLs and other tax attributes where a specified type of acquisition occurs, and the transaction has the principal purpose of tax avoidance or evasion. The IRS recently invoked Section 269 for the first time in many years to prevent a taxpayer from excluding income exclusions from GILTI. See CCA 202501008. The ability of the IRS to disallow benefits under Section 269 are discussed on pages 324-26 and 380-88.
