How do tax issues change for energy companies in a distressed environment?

KS: Companies in a distressed environment often generate substantial losses which may need to be funded with additional debt or equity capital. If the company is structured as a partnership for tax purposes, the company needs to consider how the losses will be allocated and if any limitations on deductibility will be applicable. If the company is structured as a corporation for tax purposes, consideration needs to be given to how the losses can best be utilized, including the possibility of carrying back the losses, carrying the losses forward and the limitations that could be applicable. Furthermore, companies will need to consider how to structure any new financing in order to maximize tax efficiencies. If additional equity is contributed to a partnership, the company should analyze the potential capital account adjustments that will result from the valuation used for the equity contribution in order to ensure consistency with the terms of the business deal.