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Tax attribute utilization analyzer

Evaluates a target or combined entity's tax attributes (NOLs, tax credits, capital loss carryforwards) and applies Section 382/383 limitation logic to estimate usable value over a projection horizon. Produces annual…

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Purpose

Quantify how much of a target's or combined entity's tax attributes can actually be used after an ownership change — applying Section 382/383 limitations, RBIG/RBIL adjustments, and expiration mechanics — and translate that into a present-value estimate that informs purchase price, deal structure, and post-close tax planning. Turns a raw pile of NOLs and credits into a defensible, year-by-year usable-value schedule.

When to Use

Invoke this skill when the user asks to:

  • Estimate the usable value of a target's NOLs, credits, or capital loss carryforwards in an acquisition
  • Model the Section 382/383 limitation impact of an ownership change on a target's attributes
  • Build a diligence-grade tax attribute utilization schedule for a deal
  • Quantify how much attribute value survives to inform purchase-price negotiation or a gross-up
  • Compare attribute usability across alternative deal structures (stock vs. asset, ownership change vs. none)
  • Assess expiration risk on carryforwards over a projection horizon

Inputs Required

Before starting, collect:

  • Attribute inventory: Balances by type and vintage year — federal NOLs (pre-2018 vs. post-2017), state NOLs, general business credits, AMT credits (if any), foreign tax credits, capital loss carryforwards — with generation and expiration years
  • Ownership change facts: Whether the transaction triggers a Section 382 ownership change (>50 percentage-point shift among 5% shareholders), the change date, and any prior known ownership changes
  • Section 382 inputs: Target's equity value at the change date (the loss corporation's value immediately before the change) and the applicable long-term tax-exempt rate (adjusted federal long-term rate)
  • Built-in gain/loss position: Whether the loss corporation is in a Net Unrealized Built-In Gain (NUBIG) or Net Unrealized Built-In Loss (NUBIL) position, and its estimated amount if known
  • Taxable income projection: Projected pre-attribute taxable income of the combined/surviving entity by year over the horizon
  • Projection horizon and rates: Number of years to model (default 10), applicable corporate tax rate (default 21% federal), and a discount rate for present-value (default 10%)
  • Structure and jurisdiction notes: Stock vs. asset deal, whether a Section 338 election is contemplated, and states where attributes exist and matter

If built-in gain/loss position, prior ownership changes, or the long-term tax-exempt rate are not provided, state the assumption used (e.g., current published rate, no NUBIG/NUBIL adjustment) and flag it as a variable to confirm with the deal's tax advisors.

Instructions

Step 1: Inventory and Classify the Attributes

Build a clean attribute table before any limitation math:

  • List each attribute by type, vintage year, balance, and statutory expiration
  • Flag the 80% taxable-income limitation on post-2017 federal NOLs (indefinite life, capped at 80% of taxable income) vs. pre-2018 NOLs (20-year life, no 80% cap)
  • Separate Section 382-limited attributes (pre-change losses, credits, capital losses, and RBILs) from attributes generated after the change date (unlimited)
  • Note which attributes are subject to Section 383 (credits and capital losses run through the 382 limitation after NOLs)
  • Flag any attributes near expiration within the horizon

Step 2: Determine Whether an Ownership Change Occurred

  • Confirm whether the transaction crosses the >50 percentage-point threshold among 5% shareholders over the testing period (generally 3 years)
  • If no ownership change: attributes are unlimited by 382 — model straight utilization against projected income (skip to Step 5) but still check the 80% NOL cap and expiration
  • If ownership change: proceed to Step 3 to compute the annual limitation
  • Note the continuity of business enterprise (COBE) requirement — the loss corporation must continue its historic business or use a significant portion of its assets for 2 years post-change, or the 382 limitation drops to zero

Step 3: Compute the Base Section 382 Limitation

Apply the core formula:

Annual Base 382 Limitation = Loss Corporation Equity Value at Change Date × Long-Term Tax-Exempt Rate

  • Use the equity value immediately before the ownership change (adjust for any capital contributions made to inflate value — anti-stuffing rule)
  • Multiply by the published long-term tax-exempt rate for the change month
  • This produces the annual dollar amount of pre-change NOLs (and, via 383, credits/capital losses) that can offset income each year
  • Apply the short-year proration in the year of the change (limitation × days remaining / 365)

Step 4: Apply RBIG / RBIL Adjustments

Adjust the base limitation for built-in items over the recognition period (5 years post-change):

  • If the loss corporation is in a NUBIG position (built-in gains exceed the threshold — lesser of $10M or 15% of asset FMV): the annual limitation is increased by recognized built-in gains (RBIG) during the recognition period
  • If in a NUBIL position: recognized built-in losses (RBILs) are treated as pre-change losses and subjected to the 382 limitation
  • Note which safe-harbor approach is assumed (338 approach vs. 1374 approach) — these produce materially different RBIG figures; default to the 1374 approach and flag the choice
  • Model any unused limitation carryforward: if the limitation exceeds usable income in a year, the excess adds to the next year's limitation

Step 5: Build the Year-by-Year Utilization Schedule

For each year in the horizon, in this order:

  1. Start with projected pre-attribute taxable income
  2. Apply the 382 limitation ceiling (base + RBIG + carried-forward unused limitation) as the cap on pre-change NOL usage
  3. Apply the 80% NOL cap on post-2017 NOLs against remaining income
  4. Utilize NOLs first (oldest eligible first, respecting the limitation), then apply Section 383 ordering for credits and capital losses against remaining limitation capacity
  5. Track remaining balance by attribute and vintage
  6. Flag any attribute that expires unused in that year

Produce a table with columns: Year | Projected Taxable Income | 382 Limitation | NOL Used | Credits/Cap Losses Used | Tax Saved | Attribute Balance Remaining.

Step 6: Estimate Present Value of Usable Attributes

  • Convert each year's utilized attributes into tax dollars saved (NOLs × tax rate; credits at face value)
  • Discount each year's tax savings to present value at the discount rate
  • Sum to a total PV of usable attributes
  • Compute the haircut: usable PV vs. gross face value of attributes × tax rate — this is the number that drives negotiation
  • Separate usable vs. stranded value (attributes that expire before they can be absorbed)

Step 7: Summarize Findings and Sensitivities

  • State usable value in dollars and as a percentage of gross attribute value
  • Identify the binding constraint (382 limitation, 80% cap, income shortfall, or expiration)
  • Provide a sensitivity table on the 2-3 highest-leverage variables (equity value at change, projected income, discount rate)
  • Recommend structuring or timing levers where relevant (e.g., 338(h)(10) trade-off, deferring the change date, RBIG optimization)

Output Format

  • Structure: Narrative diagnosis followed by structured tables — attribute inventory table, 382 limitation calculation, year-by-year utilization schedule, PV summary, and a sensitivity table
  • Length: 1,000–1,400 words plus tables
  • Format: Structured analytical document with tables for all numeric schedules; prose for methodology, assumptions, and recommendations
  • Sections: Attribute Inventory → Ownership Change Determination → 382 Base Limitation → RBIG/RBIL Adjustments → Year-by-Year Utilization Schedule → PV of Usable Attributes → Findings & Sensitivities → Assumptions & Flags
  • Tone: Tax director in a diligence setting — precise, citation-aware, conservative on assumptions, explicit about what requires advisor confirmation

Quality Checklist

Before delivering output, verify:

  • [ ] The 382 base limitation is computed explicitly (equity value × long-term tax-exempt rate) with the rate and value shown
  • [ ] Post-2017 NOLs are treated with the 80% cap and indefinite life; pre-2018 NOLs with 20-year life and no cap — not lumped together
  • [ ] The utilization schedule respects both the 382 ceiling and the 80% cap in every year, with ordering (NOLs, then 383 credits/capital losses) applied correctly
  • [ ] Every attribute is tracked to either full utilization or a flagged expiration — none are silently dropped
  • [ ] The PV figure and the haircut vs. gross face value are stated in dollars and as a percentage
  • [ ] Every material assumption (LTTER, NUBIG/NUBIL, RBIG approach, projected income) is explicitly listed and flagged as advisor-confirmable

Notes

  • This analysis is a decision-support model, not a tax opinion — always flag that the final 382 study, ownership testing, and RBIG/RBIL position require confirmation by the deal's qualified tax advisors
  • The single most common error is applying the 80% NOL cap to pre-2018 NOLs — vintage classification drives materially different results, so keep the two pools separate
  • The 382 limitation is a ceiling on usage per year, not a reduction of the attribute balance — unused limitation from low-income years can carry forward and matters greatly for lumpy income projections
  • When comparing structures, remember that an asset deal or 338(h)(10) election generally leaves target attributes behind with the seller — model whether the buyer is actually acquiring the attributes at all before valuing them
  • NUBIG positions can increase usable value substantially via RBIG; if the target holds appreciated assets, this is often the difference between a large haircut and near-full utilization

How to use this skill

This file is a Claude Code skill in Anthropic's standard format — markdown with YAML frontmatter at the top.

Installing in Claude Code:

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Using in Claude.ai, ChatGPT, Gemini, or other AI tools:

  1. Drag this file into a new chat, or copy and paste its contents
  2. Send your task or request as your next message — the AI will apply the skill where it fits

For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills