Per Risk Capacity
Up to
Multi-year (single aggregate) policies
with policy terms of up to
Overview
InterpretationGap® offers coverage for loss incurred as the result of one or more tax positions or tax treatments being challenged and disallowed by the relevant tax authority.
InterpretationGap® Tax Insurance can reduce or eliminate uncertainty relating to the outcome of one or more tax issues by providing reimbursement for financial loss incurred as a result of a successful challenge by the relevant tax authority.
The product can also be an effective complement to private letter rulings. As private letter rulings are issued in reliance upon representations made in the ruling request, an InterpretationGap® policy can provide a taxpayer with protection for certain representations that it has made in reliance upon statements made by a third party, such as the party that sold the asset or business at issue.
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Cover provided
InterpretationGap® Tax Insurance can cover the following components of financial loss:
- additional tax
- interest and penalties imposed on such additional tax
- the amount by which the taxpayer’s taxes are increased as a result of the payment of proceeds under the InterpretationGap® policy (e.g., “gross-up” coverage)
In addition, to further align the policy with the specific tax issue(s), InterpretationGap® Tax Insurance can be designed to:
- cover the subject matter of a tax opinion or tax indemnity, although an opinion or indemnity is not required for the insurance to be put in place to provide coverage for the specific tax issue(s)
- match the statute of limitations for the specific tax issue(s), up to 84 months. Longer policy terms may be available on a case-by-case basis.
Cover provided
InterpretationGap®
Examples of where InterpretationGap® Tax Insurance can be responsive include:
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potential recharacterization of a transaction treated as an asset sale for tax purposes
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potential challenge to place-in-service date of equipment intended to qualify for bonus depreciation
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requested survival period of a tax indemnity prevents liquidation of a fund
InterpretationGap® is available for specific tax issues that arise in a taxpayer’s ordinary course of business, as well as for general pre-closing tax liabilities in connection with acquisitions.
Common applications
InterpretationGap® can be purchased before a transaction closes, at the time of transaction, or after close. Common applications include situations in which:
- no clear guidance from the applicable tax authority or tax law precedent is available
- the taxpayer is unable or unwilling to tolerate uncertainty because of the magnitude of the financial exposure relative to the size of a transaction
- a buyer has not identified any specific tax issue, but wants to prudently minimize risk relating to the seller’s preclosing tax issues
- parties to a transaction cannot agree on the allocation of potential preclosing tax liabilities
Common applications
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