COVID-19 Pushes Strategic Tax Planning to Center Stage

Future Ready: Tax Optimization in the SAP Ecosystem

Companies’ impressively resourceful responses to the pandemic – from expanding remote work to redoubling their efforts on business continuity planning – have grabbed lots of media attention in the past year or so. Less well-publicized, but crucial for many businesses, is the heightened attention to strategic tax planning and its role in protecting cash flows and laying the groundwork for recovery.

A good example is the increased interest in tax benefits to apply in preservation plans designed to protect net operating losses (NOLs) and other tax assets in the event of an “ownership change” as defined under the Limitation on Net Operating Loss Carryforwards, as well as certain built-in losses following ownership change in the Internal Revenue Code (IRC) Section 382 and the amended Section 172 of the CARES Act. To take just a couple of recent high-profile examples, Gulfport Energy Corporation’s board of directors unanimously adopted a tax benefits preservation plan to protect some $1.3 billion in federal NOLs available to offset future taxable income. And last December, United Airlines announced a similar preservation plan to protect approximately $8.2 billion in NOLs. 

The goal of this kind of planning structure is to reduce the likelihood that a change in a company’s investor base (think “hostile takeover”) would limit its future use of its own tax assets – which in turn would reduce their value. In the wider strategic view, these tax strategies help to defend the company against an unwanted buyer that might want to deploy the NOLs for its own purposes and might not see the company’s recovery and long-term health as top priorities.  

These tactical moves suggest that companies are recognizing the strategic prominence of tax in the COVID response. The pandemic has created new opportunities for tax leaders to extend their strategic role in cross-functional initiatives and technology projects, as Vertex Chief Tax Officer Michael Bernard points out in a recent post, COVID Magnifies the Need for Procurement and Tax Alignment. Similar opportunities will continue to arise as tax leaders grapple with legislative changes stemming from tax authorities’ need to compensate for lower revenues in the wake of the pandemic. (See my colleague Marc Duclos’ post, Assessing COVID-19’s Impact on the Tax Landscape). In fact, an enhanced strategic profile for tax may be an enduring feature of the emerging “new normal” in a post-COVID world.

Blog Author

George L. Salis, Principal Economist and Tax Policy Advisor at Vertex Inc.  Vertex's Chief Tax Office (CTO) provides insight regarding the impact of tax regulations, policy, enforcement, and emerging technology trends on global tax department operations.

George L. Salis

Chief Economist and Senior Tax Policy Director

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George L. Salis is Chief Economist and Senior Tax Policy Director. He is an economist, lawyer, and tax professional with 29+ years’ experience in international taxation and trade compliance, tax planning and controversy, fiscal regulation, and tax economics consulting. He is responsible for analysis of economic, fiscal, legal, trade, and development issues in countries, as well as tracking and analyzing the rapid change in tax policies and regulations, and inter-governmental organizations, and tax administrations around the world.

George is the recipient of the Advanced Certificate in EU Law from the Academy of European Law, European University Institute in Florence, and the Executive Certificate in Economic Development from the Harvard Kennedy School of Government.

George received his BSc in economics and political science, an LLB (Honours), an MA in legal and ethical studies, and an LLM (Honours) in international tax law. He also holds the PhD in international law and economic policy, and the SJD in Taxation from The University of Florida, Levin College of Law. George is a Certified Business Economist (CBE- NABE).

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Our Global Tax Resources Related to COVID-19

In light of the current coronavirus (COVID-19) healthcare crisis impacting businesses, we have compiled a list of resources that provide information at the international, U.S. federal, and state levels.

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