Specialized Tax Services

Section 382 services customized for your needs and cash flow.

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About Specialized Tax Services

Specialized Tax Services (“STS”) focuses on providing Section 382 services. Our mission is to provide high quality Section 382 services customized for the client's needs and cash flow. STS’ vision is to be the Section 382 consultant for any and all.

Specifically, STS offers Section 382, Section 383 and Section 384 consulting, preparation, review and training based on your needs and cash flow. With STS, you will receive Big 4 quality work at lower cost, consistent communication and a shorter timeline as needed. STS can work directly with your accounting firm or your company.

With the recent law changes to the capitalization of R&D expenditures and 80% limited NOL utilization along with M&A activity, Initial Public offering (“IPO”) and bankruptcy filings, Section 382 has become more material to acquisitions, financial statements, provisions and tax returns than ever before.

Section 382 has also become a high-cost project for most companies and not all accounting firms have the expertise. Section 382 is a complicated area that requires extensive knowledge, skills and critical thinking.

By engaging with STS, you have access to a Section 382 expert with the required knowledge and the comfort that STS can work with you on the fees and timing for your Section 382 needs.

We can help with your Section 382

Section 382 (and if applicable Section 383) apply to C corporations that have carried forward the tax attributes listed below. Section 382 limits the use of tax attributes following an “ownership change” and Section 383 specifically applies to the use of tax credits and capital loss carryforwards. An annual limitation is placed on the use of the tax attributes and it is possible that the annual limitation does not allow for the utilization of the tax attributes to offset taxable income or in the worst-case, before expiration, which requires write-offs.

The tax attribute carryforwards that subject a C corporation to Section 382 are as follows:

Capital losses
Section 163(j) interest limitation
Net operating losses (“NOLs”)
Foreign tax credits (“FTCs”)
General business tax credits (i.e. R&D tax credits)
Minimum tax credits under Section 53

The tax attribute carryforward(s) can be the largest tax asset held by a C corporation. Given this and depending on the current or future events of the Company, a Section 382 study is required or should be prepared. Below is a high-level list of these events:

Generate taxable income. As companies generate or project taxable income, tax attributes should be utilized to offset the taxable income and the tax due.
Acquisition. Stock acquisitions that qualify under Section 381 will allow the buyer to acquire the seller’s tax attributes. Due to this and for the seller, knowing your Section 382 position could allow for a higher purchase price. For the buyer, knowing your Section 382 position helps with purchase price determination, purchase accounting, financial statements and support for the utilization of the acquired tax attributes.
Initial public offering (“IPO”). With an IPO, the tax footnote would generally need to be stated at fair value at a minimum.
Bankruptcy. With appropriate Section 382 preparation or consulting, it is possible to keep more tax attributes after emergence from bankruptcy. Section 382(l)(5) and/or Section 382(l)(6) analyses should be considered.
Financial audit request. Financial audits can request the tax attribute(s) deferred tax asset to be stated at current value for GAAP and tax provision purposes.
IRS audit request. Tax attribute utilization on a tax return, especially if material, is a “red flag” for the IRS.

In addition, having a Section 382 study prepared allows for the following:

Manage your ownership change(s). With cash always being key, financing is usually needed. It comes as a surprise to some but equity financing more likely than not will cause ownership change(s). In addition, financing with debt, convertible debt and SAFEs can also cause ownership change(s). It is possible to manage your ownership change(s) but only if you have a Section 382 study prepared in advance.
IRS and financial audit protection. Audits take time and having the Section 382 study prepared beforehand will be one less item to deal with.
Initial public offering (“IPO”). With an IPO, the tax footnote would generally need to be stated at fair value at a minimum.
Bankruptcy. With appropriate Section 382 preparation or consulting, it is possible to keep more tax attributes.
Financial/cash projections. With a Section 382 study, you’ll be able to estimate any tax liabilities for cash flow/projection purposes.
409A valuations. It’s imperative to correctly state your common stock option grant prices and with the Section 382 study, 409A valuations will be more accurate.

Section 384 limits the use of acquired tax attributes to offset Recognized Built-in Gain (“RBIG”) of acquiror and/or limits the use self-generated tax attributes to offset RBIG of acquired. Section 384 is a carry-on of Section 382 and is often overlooked. If there are acquired tax attributes and buyer and/or seller have any sales of assets that are generating RBIG, it is possible that certain tax attributes are not available to offset this RBIG.

STS can help you understand which tax attributes are available to offset any RBIG subject to Section 384.

 

Our Services

Specialized Tax Services (“STS”) offers Section 382, Section 383 and Section 384 consulting, preparation, review and training based on the client's needs and cash flow. With STS, you will receive Big 4 quality work at lower cost, consistent communication and shorter timeline as needed. STS can work directly with accounting firms or clients.

With STS, you receive focused Section 382 services customized for your needs and cash flow. We will look at the facts underlying the need for Section 382 services and examine all alternative analyses to accomplish your need. Once the methodology is determined, STS can work with you on your timeline and costs. It is our goal to provide Big 4 quality Section 382 services with the client’s cash flow in mind.

Engaging STS gives you access to 17+ years of Big 4 specialized experience in Section 382. We offer a broad range of services to help you understand your Section 382 position. This includes but are not limited to the following:

 

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