Companies' Debt-Restructuring Plans Could Trigger Minimum Tax

By Kevin M. Jacobs, Anthony V. Sexton and Andrey Ulyanenko¹

The unprecedented lull in restructuring activity that began suddenly after the COVID-19 wave appears to have come to an abrupt end. As companies navigate insolvency and restructuring plans, they may be surprised to learn that they could be hit with an unexpected tax bill under the new "book minimum tax" regime (BMT) that was passed as part of the Inflation Reduction Act of 2022 and came into effect at the beginning of this year.²

The BMT was promulgated to make large profitable companies pay their fair share of taxes. While it is clear that financially distressed companies were not what Congress had in mind, this article explores how it could impact distressed companies and some "fixes" that the Treasury should consider in regulatory guidance to come. This article provides the broader restructuring community details on these tax issues that could significantly affect emergence structuring, valuation