Per IRC § 382

IRC § 382 limits a corporation's ability to utilize existing net operating loss carryovers ("NOLs") following an ownership change

Ownership change is triggered by one or more shareholders increasing their stock ownership by more than 50 percentage points

• Within a span of 36 months, or
• If shorter, the period beginning the day after the most recent ownership change

If triggered, can still claim pre-change NOLs up to an annual limit

Annual limit is calculated by multiplying

24. The applicable federal long-term tax-exempt rate by
25. The entity value of the corporation

• Use the highest federal long-term tax-exempt rate for the month during which the change in ownership occurs and the preceding two months
• Federal long-term tax-exempt rate is determined monthly by the IRS

Several other rules and limitations can also apply, including provisions dealing with built-in gains and losses

M&A Tax Index