WSJ – For Companies on the Rocks, Tax Bill Doesn’t Help Much

https://www.wsj.com/articles/for-companies-on-the-rocks-tax-bill-doesnt-help-much-1517749200

 

  • New tax law will make life harder for companies struggling financially / at risk of filing for bankruptcy
  • Prior tax benefit killed that previously allowed companies to quickly raise cash – a limit on interest deductions and thus makes borrowing costlier
  • Law eliminated provision that money losing companies used to get cash infusion in form of retroactive fed tax refund by applying current losses to past tax bills (net operating loss carrybacks)
  • House Ways and Means Committee indicated lawmakers thought it important to change rules to ensure companies couldn’t use rules to eliminate a tax bill in a given year
  • Under new law, companies can’t carry back net operating losses to get refunds for taxes paid in prior two years
  • Companies can still use losses to offset future tax bills, but with new limits on how much can be used
  • Carry-backs first introduced in during WWI to keep mfg sector strong – benefit meant to help companies deal with tax system calling for income to be recorded and taxed in a way that doesn’t consider times of trouble/growth – US Supreme Court in 1957 wrote carry-back/carryforward benefits design to permit taxpayer to set off its lean years against lush years (does this apply to individuals or just corporations???)

One thought on “WSJ – For Companies on the Rocks, Tax Bill Doesn’t Help Much

  1. Back quite some time ago now, I recall a multi-year personal income averaging scheme that could be used to manage one’s tax liability when one got some type of large payout – such as a big bonus, selling a big asset, winning the lottery, etc. So, there was at one time an individual method for managing “lush vs lean” years. It may have gotten wiped out in the 1986 tax reform.

    Liked by 1 person

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