According to Section 8c of the German Corporate Income Tax Act, tax losses carried forward by a German corporation will forfeit partially if more than 25%, or if more than 50% of the shares in the corporation are acquired by one acquirer or a group of acquirers within a period of five years.

As an exception to this rule, the Growth Acceleration Act (Wachstumsbeschleunigungsgesetz) introduced the possibility that tax losses carried forward should still be utilised where the change of ownership pursues a financial restructuring (Sanierungsklausel). According to the wording of the law, such financial restructuring would have had to fulfil several requirements, for example, the avoidance of insolvency proceedings while maintaining the substantial business organisation. The Sanierungsklausel should apply for restructurings conducted after 31 December 2007.

In February 2010, the European Commission has opened a formal investigation under EU Treaty state aid rules, as the Commission was concerned that the measure may favour ailing companies in comparison to healthy companies. Therefore, the Commission had doubts on the compatibility of the measures with the EU Guidelines on Rescue and Restructuring aid.

The German Federal Ministry of Finance reacted in April 2010 by issuing a decree according to which the tax administration was ordered to refrain from the application of the Sanierungsklausel.

On 26 January 2011, the Commission finalised the formal investigation and declared the provision to be unlawful state aid and ordered Germany to recover all already assessed tax reliefs based on this provision. According to the Commission's argumentation, the Sanierungsklausel is selective and therefore violates the EU Guidelines on Rescue and Restructuring aid, as it differentiates between ailing companies and healthy companies. Although both companies could generate losses, only ailing companies are eligible for the carry forward of such losses under the Sanierungsklausel. The conclusion of the Commission is that the Sanierungsklausel favours ailing companies and distorts competition.

As a result of the Commission's investigation, the German Federal Ministry of Finance is currently considering how to proceed. The decision of the Commission could be challenged within two months with an action for annulment, what is currently subject to discussion on the level of the German Federal Ministry of Finance. Another option would be to eliminate the Sanierungsklausel from the respective provision of the German Corporate Income Tax Act. Corporations, which have applied the Sanierungsklausel in the past must be prepared to face retroactive modifications of their tax assessments, which will lead to increased tax payments.