How Do States Treat NOLs Obtained through Mergers and Acquisitions?
State Adoption of IRC Section 382 — As we explained in Issue 51, when a loss corporation experiences an ownership change, IRC Section 382 imposes a limitation on the amount of taxable income in any post-change year that may be offset by pre-change losses. From a state perspective, one must first determine whether the states where the loss corporation transacts business have adopted IRC Section 382. For the most part, states that have adopted IRC Section 381, either expressly or implicitly, also adopt Section 382. However, in states where Section 382 is adopted, the reality is that very little, if any, guidance is provided on the application of the 382 limitation. That being said, a few states have laws, regulations or case law that provide some indication on its application. For instance, Georgia regulations provide that the IRC Section 382 limitation shall follow the federal rules but must be computed on a separate-company basis even when a consolidated federal income tax return is fi
