NOL Poison Pills: Using Corporate Law for Tax Purposes

Karie Davis-Nozemack

Georgia Institute of Technology - Scheller College of Business

Sarah Webber

University of Dayton

April 24, 2012

Hundreds of thousands of corporations use net operating loss (NOL) carryovers every year. Corporations, with the benefit of NOL rules, may turn disappointing losses into favorable tax results. With an economic recovery on the horizon, corporations are in better position to fully utilize the benefits of NOLs generated in prior years. NOL usage is not without peril, however. Corporations should carefully monitor corporate ownership changes to ensure that NOLs are not lost to the NOL trafficking rules. Under the NOL trafficking rules, excessive shareholder turnover triggers substantial NOL limitations. Unfortunately, corporations are not in control of their shareholder turnover, and therefore not in complete control of their NOLs. To maintain NOL control, corporate tax planning may utilize corporate law, including an NOL poison pill plan. This article discusses the motivations, benefits and consequences of NOL poison pill plans.

Keywords: Tax, NOL, Poison Pill, 382, tax planning, corporate law, net operating loss, tax loss, shareholder

JEL Classification: K20, K22, K34

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Date posted: April 24, 2012 ; Last revised: October 28, 2015

Suggested Citation

Davis-Nozemack, Karie and Webber, Sarah, NOL Poison Pills: Using Corporate Law for Tax Purposes (April 24, 2012). Available at SSRN: https://ssrn.com/abstract=2045752

Contact Information

Karie Davis-Nozemack (Contact Author)
Georgia Institute of Technology - Scheller College of Business ( email )
800 West Peachtree St.
Atlanta, GA 30308
United States
HOME PAGE: http://mgt.gatech.edu/directory/faculty/davis-nozemack/index.html

Sarah Webber
University of Dayton ( email )
300 College Park
Dayton, OH 45469
United States
937-229-2432 (Phone)
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