Five Questions With Nixon Peabody Partner Nicholas Gerlach

Bloomberg Tax Insights & Commentary is featuring a recurring questionnaire of prominent tax professionals who are willing to share their thoughts about their work and the practice of tax these days. Today we feature Nicholas Gerlach, a partner in Nixon Peabody’s corporate practice group and a member of the firm’s tax team.

What is the biggest challenge that tax practitioners are facing in 2026?

Tax practitioners are juggling a lot more complexity and risk, often with the same amount of time and people. Rules are changing quickly and not always in clean, easy-to-apply ways. At the same time, tax agencies are using more data and automation, which means notices and audit questions can come faster, and it will be harder to unwind if you miss a deadline or don’t have the right documentation ready.

Day to day, the challenge is less “finding the rule” and more “managing the process”—getting the facts nailed down, keeping records tight, coordinating across teams and jurisdictions, and making solid judgment calls in gray areas.

What tax issue keeps you up at night?

One issue is potential unidentified tax exposures that survive closing and may show up later in a large, non-negotiable assessment. Those types of exposures can include areas such as state and local nexus and sales/use tax liabilities that weren’t priced, escrowed, or cleanly covered by reps, indemnities, or insurance.

Tax agencies can assert liability years later and collection tools can be aggressive. If the deal documents don’t clearly allocate responsibility and control of audits, the buyer can end up holding the bag for a problem nobody modeled, even when the underlying target business looked clean.

What’s the biggest lesson you learned in your early years of practice?

I learned early on that the “tax answer” is only half the job in a deal. The other half is making sure the facts, the documents, and the closing mechanics actually support that desired answer.

In practice, that means (1) getting the right people in the room early so you aren’t reverse-engineering the structure right before signing, (2) being obsessive about definitions and covenants because small drafting choices can flip the tax result, and (3) assuming that anything not clearly allocated in the tax section, however minor, will become an issue later.

What is one section of the tax code that you’d like to change?

Section 382 limits a corporation’s ability to use net operating loss carryforwards after a significant ownership change (generally more than 50% over a three-year period). The rationale is to prevent trafficking in loss corporations—essentially buying a company solely for its tax losses.

In theory it’s a sensible anti-loss trafficking rule, but in practice, the provision can be a real obstacle for distressed companies that need new investment to survive. And it can turn a straightforward acquisition or capital raise into a minefield: Ownership change testing is technical, the consequences can be wildly disproportionate to any “abuse,” and it can wipe out the value of net operating losses and credits that were a real part of the deal economics.

It is also hard to administer over time, especially for companies with frequent equity issuances, redemptions, and shifting institutional ownership.

A company going through a legitimate restructuring or recapitalization can find its most valuable tax asset severely limited precisely when it needs it most. Some have proposed reforms that would better distinguish between abusive loss-trafficking transactions and genuine restructurings, though drawing that line is admittedly difficult.

What was the last thing you believed beyond a reasonable doubt?

In a deal, the documents are the facts. If the mechanics and the paper trail don’t match the tax story, the tax story won’t survive. Interpretations can be debated, but deadlines, signed elections, and a clean paper trail make a difference between a defensible position and an expensive surprise later.

Transactional outcomes often depend on formalities and records (that is, what the purchase agreement actually says and when elections were timely filed). So if the paper trail is incomplete or inconsistent, the intended tax treatment can collapse, and it will be much harder to defend at a later audit.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

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