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SEC Filings

10-K
DITECH HOLDING CORP filed this Form 10-K on 04/16/2019
Entire Document
 

Under the WIMC Prepackaged Plan, a substantial amount of the Company’s debt was discharged. Absent an exception, a debtor recognizes CODI upon discharge of its outstanding indebtedness for an amount of consideration that is less than its adjusted issue price. The amount of CODI recognized by a taxpayer is the adjusted issue price of any indebtedness discharged less the sum of (i) the amount of cash paid, (ii) the issue price of any new indebtedness issued and (iii) the fair market value of any other consideration, including equity, issued.
The Code provides that a debtor whose debt is discharged pursuant to a confirmed Chapter 11 plan does not recognize taxable CODI but must reduce certain of its tax attributes by the amount of the CODI excluded from taxable income. The reduction in the Company's tax attributes for excluded CODI has been estimated in connection with the determination of Company's tax liability for the tax year ending December 31, 2018, and will be finalized upon the Company's preparation and filing of the 2018 tax return.
As provided by Section 382 of the Code and similar state law provisions, utilization of certain tax attributes may be subject to substantial annual limitations due to an ownership change in the Company. Under the rules, statutorily defined ownership changes may limit the amount of tax attributes that can be utilized annually to offset future taxable income and tax. In general, an ownership change, as defined by Section 382 for federal income tax purposes, results from transactions that increase the ownership of statutorily defined 5% stockholders in the stock of a corporation by more than 50% in the aggregate over a testing period, generally three years.
The Company experienced an ownership change in connection with the Company's emergence from the WIMC Chapter 11 Case on February 9, 2018. The Company currently expects to apply the rules under Section 382(l)(5) of the Code and the U.S. Treasury regulations thereunder that would allow the Company to mitigate the limitations imposed under Section 382 with respect to the Company's remaining tax attributes and the Company’s deferred tax assets and liabilities have been computed on such basis. However, the application of such provision remains subject to examination by the IRS. Taxpayers who qualify for this provision may, at their option, elect not to apply it. If such provision does not apply, the Company's ability to realize the value of its tax attributes would be subject to limitation and the amount of its deferred tax assets and liabilities may differ. Also, an ownership change subsequent to the Company's emergence from bankruptcy could severely limit or effectively eliminate its ability to realize the value of its tax attributes.
Income tax benefit consists of the following components (in thousands):
 
 
Successor
 
 
Predecessor
 
 
For the Period From February 10, 2018 Through December 31, 2018
 
 
For the Period From January 1, 2018 Through February 9, 2018
 
For the Year Ended 
 December 31, 2017
Current
 
 
 
 
 
 
 
Federal
 
$
(3,430
)
 
 
$
(112
)
 
$
2,757

State and local
 
(1,647
)
 
 
70

 
(2,315
)
Current income tax expense (benefit)
 
(5,077
)
 
 
(42
)
 
442

Deferred
 
 
 
 
 
 
 
Federal
 
3,193

 
 
83

 
(4,215
)
State and local
 
(767
)
 
 
(59
)
 
416

Deferred income tax expense (benefit)
 
2,426

 
 
24

 
(3,799
)
Total income tax benefit
 
$
(2,651
)
 
 
$
(18
)
 
$
(3,357
)

F-69