Virus Loss Benefit Less Likely to Stir Merger Agreement Troubles

Large companies that made a recent acquisition can more easily avoid sending tax refunds for losses to their new entities’ previous owners, under temporary pandemic-relief rules from the IRS.

The third Covid-19 relief law, known as the CARES Act (Public Law 116-136), permitted companies to carry losses back five years to trigger retroactive tax breaks. But the legislation left open a question: what happens when a consolidated group of companies that file a single tax return wants to carry back losses, but a new entity they bought in the last couple of years would ...