Section 199: 2010 Means More Bang for Your Domestic Production Buck

State Agencies Increase Audit Activity ... How to Manage the Audit Process

As merger and acquisition activity begins to pick up, it’s worth revisiting recent changes in tax legislation and anti-avoidance developments that are of particular relevance to deal structuring. In this edition of Tax Advisor Update, Ian Fleming and Jonathan Hornby consider the issues in a private equity context, but also raise technical points of equal relevance to corporates of all sizes, particularly those contemplating M&A activity and transactions involving debt.

Recently, the federal government provided some relief to suffering businesses through the extension of the net operating loss (NOL) carryback. In a previous edition of Tax Advisor Weekly (, November 19, 2009), we noted that the carryback of a net operating loss would require a recalculation of the foreign tax credit limitation in those earlier years. As part of that analysis, or even apart from it, taxpayers may have the opportunity to re-evaluate decisions made in earlier years with respect to foreign taxes.

Many taxpayers have found themselves saddled with the inability to claim foreign tax credits. In large part, taxpayers who have an overall foreign loss (OFL) are subject to double taxation on any foreign earnings that become subject to U.S. taxation. Not only do lower tax rates abroad encourage foreign investment, but the inability to achieve relief under the U.S. foreign tax credit regime makes it prohibitively expensive for companies to repatriate such earnings.

One of the more confounding items that public companies must now deal with in the sales and use tax area is Financial Accounting Standards Statement Number 5 (FAS 5), Accounting for Contingencies.