West Texas Intermediate’s $40 December dip has caused many in the oil patch to dust off their downturn playbooks even though the scabs from the last time have hardly healed. Most of the painfully learned lessons from the past remain the same, but the federal income tax changes enacted at the end of 2017 create some new issues and opportunities.

The bad news is that several of the tax changes can adversely affect the tax bill of oil patch companies. Specifically, net operating losses can no longer be carried back to prior years, allowing the clawback of income taxes paid since the last crash. Such losses can now be carried forward indefinitely but can only offset 80% of each future year’s taxable income.

Adding insult to injury, interest expense deductions are typically limited to 30% of adjusted EBITDA with excess interest expense carried forward indefinitely. Also, the alternative minimum tax continues to apply to individuals and is more insidious given the reduced regular income tax rates particularly when “new to you” equipment is expensed in the year of acquisition.

The good news is that the new 2017 tax rules provide some tools to cope with current taxes. Specifically, C-corporations are now taxed at 21%, a nice contrast to the new 29% to 37% ordinary income rate for individuals.

Thus, if you anticipate triggering big chunks of ordinary income and little net cash after debt service, such as from sales of equipment already written off, or worse, cancellation of debt (COD) income, then checking the box to convert your S-corp or LLC/partnership business into a C-corporation may save you significant current taxes. However, this can come at a future tax cost even it lets you live to see another day.

COD income can be an unpleasant surprise for debtors taxed as partnerships or S-corporations since the owners are taxed on the income at ordinary rates. If there is no cash from the entity to fund the tax bill, such phantom income can create an involuntary capital contribution.

Corporate borrowers can exclude COD income to the extent the corporation is insolvent or if it’s in bankruptcy. However, the bankruptcy and insolvency income exclusions are applied at the owner level for entities taxed as partnerships. Thus, even if the partnership or limited liability company is bankrupt or insolvent, the bankruptcy or insolvency exclusion can be used only if the owner is bankrupt or insolvent.

S-corporation shareholders fare much better since the income exclusion for the cancellation of debt for insolvent or bankrupt borrowers applies at the entity level. Debt contributed to the capital of a corporation can also avoid COD income in certain circumstances.

These anomalies can tempt entities taxed as partnerships to become corporations by filing a check-the-box election or a state law conversion. While this can often be accomplished on a tax-deferred basis, it can create income for the uninformed. For example, partners with a deficit capital account and allocable partnership debt may recognize income even in an otherwise tax-deferred incorporation. Also, the tax basis of assets contributed to a corporation in a tax-deferred formation will be reduced to the extent the fair market value of the assets is less than the tax basis.

However, even if income is recognized on incorporation, individual partners may fare better because such income may be less than the total COD income and be taxed at lower rates. Of course, once the business is taxed as a C-corporation, the tax rate on all income is 21% and, most importantly, there is no alternative minimum tax.

The choice to be taxed as a C-corporation should be carefully considered because there can be a significant tax cost for reverting to being taxed as a partnership. The good news is that the effective double tax rate for C-corporation earnings paid as dividends to shareholders is only 36.8%, which looks good compared to the 37% rate on individual ordinary income.

That compares less favorably to the 20% long-term capital gain rate for individuals and 29.6% rate for ordinary income if the new 20% qualified business income deduction is available. More importantly, C-corporation shareholders don’t get an increase in stock basis for undistributed earnings like S-corporations and partnerships.

Many of the old tax planning tools still apply, but the new limitations on net operating losses and interest expense, coupled with the repeal of the alternative minimum tax and sharply reduced tax rate for C-corporations, create a new dynamic for these old planning tools. Timing and good tax accounting information are critical to making these choices. Knowing the tax basis of the ownership interests and assets of the business, along with the current income and loss situation, can enable oil patch companies to minimize their current taxes and weather what could be another nasty downturn.

John Ransom is a transaction and tax lawyer with Jackson Walker LLP, where he leads the firm’s Houston corporate practice group.

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