September 17, 2009

State Treatment of Cancellation of Indebtedness Income (CODI): Why Electing to Defer CODI Can Leave Some Taxpayers in a Worse Position

The American Recovery and Reinvestment Act of 2009 (ARRA), enacted Feb. 17, 2009, provides taxpayers with an election to defer recognition of cancellation of indebtedness income (CODI) on debt instruments reacquired by the debtor or a related party in 2009 or 2010. While this provision offers taxpayers an opportunity to restructure capital and clean up their debt, it could raise tax liabilities for distressed companies operating in states that choose to decouple from it.

This presentation focuses on the state tax issues that could potentially arise for taxpayers seeking relief under I.R.C. § 108(i). It identifies the states that have conformed to or decoupled from the federal provision and considers issues—such as the apportionment or allocation of CODI—that most state taxing jurisdictions have not yet addressed. 

What will be covered

This 90 minute webinar will provide participants with a conceptual understanding and practical application of the following:

1. The election to defer cancellation of indebtedness income (CODI) under I.R.C. § 108(i)
2. Which states have adopted the provision or have decoupled from it
3. The various approaches the states have used to decouple from the provision
4. The state income tax implications for financially distressed companies operating in states that have decoupled from the provision
5. State income tax issues likely to arise for taxpayers seeking relief under § 108(i), such as whether CODI constitutes business on nonbusiness income
6. The interplay between I.R.C. § 108(i) and state net operating loss provisions

Education Objectives 

Participants will learn how to:

1. Understand the CODI provision under I.R.C. § 108(i)
2. Identify the state income tax issues that could potentially arise for taxpayers seeking relief under the provision
3. Explain the pitfalls that could potentially await taxpayers in states that have not adopted or chosen not to adopt I.R.C. § 108(i)
4. Recognize those states that have adopted I.R.C. § 108(i) or have decoupled from it
5. Understand the methods by which states have decoupled from I.R.C. § 108(i)  and the implications for taxpayers
6. Identify key issues that most states have not yet addressed, such as the allocation or apportionment of CODI

Recorded on September 17, 2009, this event is available on CD for purchase.