Code Section 382
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 382 | 2/17/2009 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Clarification of regulations related to limitations on certain built-in losses following an ownership change | 6,997 |
| 382 | 2/17/2009 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Treatment of certain ownership changes for purposes of limitations on net operating loss carryforwards and certain built-in losses | -3,163 |
Clarification of regulations related to limitations on certain built-in losses following an ownership change
Explanation of Provision
The provision states that Congress finds as follows: (1) The delegation of authority to the Secretary of the Treasury, or his delegate, under section 382(m) does not authorize the Secretary to provide exemptions or special rules that are restricted to particular industries or classes of taxpayers; (2) Notice 2008–83 is inconsistent with the congressional intent in enacting such section 382(m); (3) the legal authority to prescribe Notice 2008–83 is doubtful; (4) however, as taxpayers should generally be able to rely on guidance issued by the Secretary of the Treasury, legislation is necessary to clarify the force and effect of Notice 2008–83 and restore the proper application under the Internal Revenue Code of the limitation on built-in losses following an ownership change of a bank.
Under the provision, Notice 2008–83 shall be deemed to have the force and effect of law with respect to any ownership change (as defined in section 382(g)) occurring on or before January 16, 2009, and with respect to any ownership change (as so defined) which occurs after January 16, 2009, if such change (1) is pursuant to a written binding contract entered into on or before such date or (2) is pursuant to a written agreement entered into on or before such date and such agreement was described on or before such date in a public announcement or in a filing with the Securities and Exchange Commission required by reason of such ownership change, but shall otherwise have no force or effect with respect to any ownership change after such date.
Treatment of certain ownership changes for purposes of limitations on net operating loss carryforwards and certain built-in losses
Explanation of Provision
The Act amends section 382 of the Code to provide an exception from the application of the section 382 limitation. Under the provision, the section 382 limitation that would otherwise arise as a result of an ownership change shall not apply in the case of an ownership change that occurs pursuant to a restructuring plan of a taxpayer which is required under a loan agreement or commitment for a line of credit entered into with the Department of the Treasury under the Emergency Economic Stabilization Act of 2008, and is intended to result in a rationalization of the costs, capitalization, and capacity with respect to the manufacturing workforce of, and suppliers to, the taxpayer and its subsidiaries.122
However, an ownership change that would otherwise be excepted from the section 382 limitation under the provision will instead remain subject to the section 382 limitation if, immediately after such ownership change, any person (other than a voluntary employees’ beneficiary association within the meaning of section 501(c)(9)) owns stock of the new loss corporation possessing 50 percent or more of the total combined voting power of all classes of stock entitled to vote or of the total value of the stock of such corporation.
For purposes of this rule, persons who bear a relationship to one another described in section 267(b) or 707(b)(1), or who are members of a group of persons acting in concert, are treated as a single person.
The exception from the application of the section 382 limitation under the provision does not change the fact that an ownership change has occurred for other purposes of section 382.123
122- This exception shall not apply in the case of any subsequent ownership change unless such subsequent ownership change also meets the requirements of the exception.
-Return to Explanation of Provision
123- For example, an ownership change has occurred for purposes of determining the testing period under section 382(i)(2).
-Return to Explanation of Provision