EMKR - EMCORE Corporation Adopts Tax Benefits Preservation Plan to Protect Tax Assets | Benzinga
ALHAMBRA, CA, Sept. 28, 2023 (GLOBE NEWSWIRE) -- (NASDAQ:EMKR) EMCORE Corporation ("EMCORE") announced today that its Board of Directors has approved the adoption of a tax benefits preservation plan ("the plan") in the form of a Section 382 rights agreement designed to protect and preserve the long-term value of certain tax attributes primarily associated with net operating loss carryforwards.
EMCORE intends to submit the plan, which is similar to tax benefits preservation plans adopted by many other public companies with significant tax attributes, for shareholder ratification at its 2024 annual meeting of shareholders.
As of September 30, 2022, EMCORE had approximately $424.9 million of federal net operating loss carryforwards ("NOLs"), that could potentially be utilized in certain circumstances and subject to certain restrictions to offset EMCORE's future taxable income and reduce its federal income tax liability. Additional information with respect to these NOLs is contained in EMCORE's Annual Report on Form 10-K for the fiscal year ended September 30, 2022, which EMCORE filed with the Securities and Exchange Commission ("SEC") on December 28, 2022.
Section 382 of the Internal Revenue Code ("Section 382") imposes limitations on the future use of a company's NOLs if the company undergoes an "ownership change." EMCORE's ability to benefit from its tax attributes could be substantially limited, or lost altogether, by Section 382 if an "ownership change" occurred. A company generally experiences an "ownership change" if the percentage of its shares of stock owned by one or a group of its 5% shareholders (as defined in Section 382) increases by more than 50 percentage points over a rolling three-year period. While EMCORE periodically monitors its NOLs and currently believes that an ownership change that would impair the value of its NOLs has not occurred, the complexity of Section 382's provisions and the limited knowledge any public company has about the ownership of its publicly traded stock make it difficult to determine whether an ownership change has in fact occurred.
To protect EMCORE's NOLs from being limited or permanently lost under Section 382, the plan is intended to reduce the likelihood of an unintended "ownership change" occurring through the buying and selling of ...