The passage of tax reform last December gave investors greater security when it comes to corporate tax rates in the near future. One consequence is the increased interest of some investors in acquiring payment rights under existing tax receivable agreements (TRAs). In short, ACCORDS are agreements made by a company (a «pubco») as part of an IPO to monetize Pubco`s tax attributes after the IPO for the benefit of owners prior to the IPO and investors who acquire payment rights under TRAs to such pre-IPO owners. Our previous article on ARTs focused on some ways in which tax reform could affect the value of TRA payment rights. Since the introduction of tax reform, we have seen a marked increase in investor interest in the acquisition of TRA payment rights, including through hedge funds, family offices and private trust funds. This article describes some of the functions of an AED that an investor should analyze before acquiring rights under an AER. Payments under Article III of tax receivables contracts are reduced to a pro-rata basis of 85% of all tax costs (such as public and local taxes) resulting from Medifax`s restructuring, provided that this reduction does not in any way exceed the amounts payable under the tax receivables agreements as a result of Medifax`s restructuring alone. For more information on investments in ARTs, please contact one of the following members of the Ropes-Gray team: It is anticipated that the provisions of this agreement will not result in a double payment of an amount (including interest) required by tax receivables agreements. It is also expected that the provisions of the tax treaties will result in the payment of 85% of the total net tax benefit and the amount accumulated to those to whom the payments are due under the tax treaties. The parties agree that the parties to the other tax collection agreements are expressly defined as third-party beneficiaries of the provisions of this section 3.03. Each individual tra investment should be considered taking into account the specific provisions of the TRA and the facts applicable to the pubco concerned. These concrete facts may raise specific questions of diligence.
However, there are a number of issues to consider for most PURCHASEs of TRA payment rights, including the following: