Navistar International’s board of directors has approved an amendment to its tax asset protection plan, extending it to November 3, 2014.
The plan was adopted in June to protect the long-term value of Navistar's substantial net operating losses that expired at the beginning of September, according to the company.
"Following the adoption of the tax asset protection plan this past June, Navistar's board of directors has further reviewed and studied the status of the company's net operating losses and other carry-forwards to determine the alignment of the plan with the best interests of the company," said James Keyes, Navistar's board of directors non-executive chairman.
The tax asset protection plan was first adopted to protect Navistar's tax assets by reducing the likelihood of an unintended ownership change under IRS guidelines, according to the company. It said this plan is similar to tax protection plans adopted by other public companies with significant tax attributes. As of October 31, 2013, Navistar had a federal net operating loss carry-forward of approximately $1.7 billion.
Under Section 382 of the Internal Revenue Code, the use of the company's net operating loss and other carry-forwards would be limited in the event of an "ownership change," which is defined as a cumulative change of more than 50% during any three year period by stockholders owning 5% or more of the company's stock.
“The tax asset protection plan is designed to discourage any person or group from becoming a 5%, thereby reducing the risk of such an ownership change,” Navistar said in a statement. “There is no guarantee, however, that the plan will prevent the company from experiencing an ownership change, and the company may pursue additional means of protecting this substantial asset.”
Existing stockholders holding 4.99% or more of the company's outstanding shares of common stock are exempt from the provisions of the plan unless they make additional purchases.