Quick take
Tax attributes are only worth what the buyer can actually use after closing.
Glossary term
Section 382 NOL Limitation
Section 382 is the U.S. tax rule that can limit how much of a target company's net operating losses can be used after an ownership change. In M&A, buyers review Section 382 because tax attributes that look valuable on paper may be much less valuable if post-close usage is capped.
Why it matters
A target may appear to have meaningful NOL value, but that value can shrink quickly once an ownership-change limitation is applied.
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Sorai Editorial
Reviewed by Sorai’s diligence research and workflow design team.
Financial, tax, legal, and transaction process terminology for investor-facing diligence workflows.
Key points
- Applies when ownership change thresholds are met under U.S. tax rules.
- Can limit annual NOL usage after an acquisition closes.
- Affects buyer valuation of tax attributes and structure alternatives.
- Usually appears in tax diligence and deal-structure analysis.
- Needs coordination between tax diligence and modeling teams.
Related terms
Related resources
Frequently asked questions
What is Section 382?
It is the U.S. tax rule that can limit post-acquisition use of a target company's NOLs after an ownership change.
Why does Section 382 matter in M&A?
Because buyers may overvalue tax attributes if they do not test whether those attributes can still be used after closing.
Does Section 382 eliminate NOLs entirely?
Not necessarily. It usually limits how much can be used each year rather than automatically eliminating the attribute in full.