This is the fourth in a series of six articles about the volatile financial misfortunes and turnaround of trucking company YRC Worldwide. See parts one, two, three, five and six.

Terry Gerrond is like all employees of YRC Worldwide: each time the company completed another refinancing, staving off bankruptcy or worse, he got to keep his job.

But Gerrond has a special perspective. As vice president of taxation, he frowns at one side effect of the refinancings: a limitation on using YRC’s net operating losses (NOLs) to mitigate future tax liabilities.

Terry Gerrond

Each of the company’s debt restructurings in 2009, 2011, and 2014 was subject to IRS rules that limit the amount of NOLs that can be carried forward at any point in time when there’s been greater than a 50% change in company ownership compared with three years prior. Each restructuring was marked by enough new equity investment, lenders’ conversion of convertible notes from debt to equity, or both to reach that threshold. (Interestingly, YRC also reached the threshold in 2013, simply because of significant investors buying or selling the stock, and convertible debt holders exercising their conversion rights.)

The rules — which have been part of the tax code for many decades, as most recently amended in the Tax Reform Act of 1986 — have a meritorious purpose: to prevent profitable companies from buying money-losing companies at bargain prices and using the latter’s NOLs to mitigate their own tax liabilities. But the rules are written broadly enough that they apply to other scenarios as well.

“Back in the 1960s or 1970s there was a lot of that abuse,” Gerrond says. “But Congress tends to have knee-jerk reactions to things, and we ended up with legislation that’s the classic sledgehammer going after a fly. Why would that rule apply to a company that’s not being bought by a bigger entity? UPS didn’t buy us, so why should our losses be limited? Our losses are not being utilized by any company but the one that already existed. But the rule as written is relevant to us, so we have to deal with it.”

Determining whether ownership has changed by at least 50% within a three-year period, according to the statutory definition, requires a “horribly complex” calculation, Gerrond notes. That’s why companies generally turn to the big professional services firms, in YRC’s case Ernst & Young, to perform it.

As of Dec. 31, 2014, YRC estimated its cumulative NOLs to be about $698 million, but based on EY’s calculation, slightly more than a third of that amount, $235 million, will be unavailable to offset future taxable income. (Those numbers are subject to revision as YRC finalizes its 2014 federal tax return and refines the computations of the NOL limit.)

Meanwhile, Gerrond, like many employees of long-struggling YRC, spent some time a while back brushing up his résumé and thinking about possible opportunities. But a lot of factors argued against making a move.

First was simply that he’d been with the company since 1989 and felt a certain loyalty to it, regardless of its management changes over the years. Second, he owned equity in YRC, which he received as part of his compensation, and he also was vested in the company’s pension plan. Third, during his days in public accounting he had seen that at bankrupt companies, tax managers were usually among the last out the door, so his career at the company likely would continue for quite awhile even if it went belly up.

Finally, and most interestingly, was the nature of the work. “This company always has enough going on that I learn something every week, something I haven’t touched in a long time or have never touched at all,” Gerrond says. “For instance, I’ve learned a lot about the tax aspects of bankruptcy, the kind of debt financing transactions we’ve put together, and some of our executive compensation packages. I’m enough of a tax geek that that stuff fascinates me.”