Let’s be honest. The last few years have reshaped the business landscape in ways we’re still figuring out. For many owners and executives, the path forward isn’t about explosive growth—it’s about strategic survival. That means restructuring, closing unprofitable lines, or sometimes, selling off assets to keep the core alive.
And here’s the deal: the tax implications of these moves have gotten… complicated. Pandemic-era legislation, shifting IRS focus, and new economic realities have created a maze. Navigating it wrong can turn a necessary business decision into a financial nightmare. So, let’s dive into the key post-pandemic tax considerations you need on your radar.
The Changed Landscape: It’s Not 2019 Anymore
First off, you have to forget the old playbook. The government’s massive relief efforts—think Employee Retention Credits (ERC), PPP loans, and various state grants—left a tangled web of rules. These programs directly impact your tax position when you restructure or sell.
For instance, if you’re considering an asset sale and you claimed the ERC, you need to be crystal clear on the recapture rules. The IRS is scrutinizing these credits heavily, and a sale could trigger a painful clawback if the credit was claimed in error. It’s a major audit red flag right now.
Net Operating Losses (NOLs): A Shifting Safety Net
Remember the CARES Act? It temporarily allowed NOLs from 2018-2020 to be carried back five years, which was a lifeline. Well, that’s mostly gone. For NOLs generated in tax years after 2020, the old rule is back: you can only carry them forward. And they can only offset up to 80% of taxable income in any given year.
Why does this matter for a closure or restructuring? Well, if you’re generating final losses as you wind down, their usefulness is now limited. You can’t get a quick refund from past years. This changes the math—the timing of recognizing income and losses in your final years has become a high-stakes puzzle.
Restructuring: Choosing the Right Path
Maybe you’re not closing, but reshaping. Merging divisions, spinning off a unit, or changing your legal entity structure. The tax code offers pathways, but you have to pick the right one.
Section 368 reorganizations—things like mergers or consolidations—can often be tax-free if structured precisely. But the “if” is huge. The post-pandemic scrutiny is on substance over form. The IRS is laser-focused on whether these moves have a genuine business purpose or are just tax avoidance in disguise.
And then there’s debt. Many businesses took on new debt or had debt forgiven during the pandemic. Debt forgiveness is generally taxable income. If your restructuring involves modifying or forgiving debt between related entities, the tax consequences can be counterintuitive and severe. Don’t get caught assuming it’s just paper shuffling.
Key Questions for a Restructuring:
- Have you accounted for all pandemic relief? Its impact on your basis and earnings & profits (E&P) is critical.
- What’s the state tax footprint? Remote work has blurred physical presence. Restructuring might accidentally create a new tax nexus in a state, dragging you into unexpected filings.
- Are you carrying hidden tax attributes? Things like tax credit carryforwards or built-in losses need to be mapped and understood—they can be a valuable asset or a deal-breaker.
The Difficult Decision: Business Closures
Closing a business feels like a funeral. And the tax process? It’s the probate. The goal is to settle affairs cleanly.
You’ll likely have a final asset sale—even if it’s just auctioning off desks and equipment. This triggers a cascade of tax events. Depreciation recapture can be a nasty surprise. That computer you’ve been writing off for years? When you sell it for more than its written-down “book” value, the IRS wants that deduction back as ordinary income.
Here’s a quick, sobering table of common closure triggers:
| Action | Potential Tax Consequence |
| Selling remaining inventory | Ordinary income (or loss) |
| Terminating the lease & receiving a payout | Ordinary income |
| Forgiving loans to shareholders | Dividend distribution (taxable) |
| Final wage payments & bonuses | Payroll taxes, deductible expense |
| Writing off unsellable assets | Potential ordinary loss |
And don’t forget about state-level dissolution requirements. Failing to properly file final returns and surrender your business license can lead to penalties and personal liability—years down the road. It’s a ghost that can haunt you.
Asset Sales: Maximizing Value in a New Market
Perhaps you’re selling a piece of the business to raise capital. The classic advice was “sell assets, not stock” for buyers. But sellers, you know, that often means a higher tax bill for you, because you’re taxed on each asset’s gain.
The post-pandemic twist? Buyers are hyper-aware of hidden liabilities, including tax liabilities from pandemic programs. They’re doing deeper due diligence. They will request indemnifications for any ERC or PPP loan issues. This shifts negotiation power. Your ability to present clean, well-documented tax histories is part of the sale price now.
Also, the tax treatment of intangible assets—customer lists, proprietary processes developed during the pandemic, even a boosted social media presence—is a hot area. Properly valuing and allocating sale price to these assets (which can often mean favorable capital gains rates) is more art than science now.
The Installment Sale Option
Cash flow is king for everyone. If a buyer can’t pay all upfront, consider an installment sale. You report gain only as you receive payments. In a higher-interest-rate environment, the math on this changes. The “time value of money” concept is crucial—delaying tax payments can be a win, but you’re also taking on the buyer’s credit risk. It’s a trade-off.
Pulling It All Together: A Proactive Checklist
Look, this isn’t about causing panic. It’s about prompting action. Before you make any major structural move, pause and run through this list.
- Conduct a “Pandemic Relief Audit.” Document every dollar of PPP, ERC, state grants. Know the rules attached to each.
- Model the NOL impact. Use projections. See how losses will actually be used under the 80% limit.
- Engage early with tax advisors. I mean, before negotiations start. Structure dictates tax outcome.
- Run state-by-state nexus analysis. Where are your employees? Where is your digital footprint? This is non-negotiable now.
- Clean up your balance sheet. Identify obsolete inventory, fully depreciated assets. Know what you really have to sell or write off.
The businesses that will navigate this well are those that see tax not as a year-end compliance chore, but as a core component of strategic decision-making. The pandemic forced agility. The recovery demands informed precision. Your next move is more than a business decision—it’s a financial statement written in code, one the IRS will read very, very closely.