Common use of Computation of Tax Loss and Tax Indemnity Clause in Contracts

Computation of Tax Loss and Tax Indemnity. Any tax indemnity payable by EME shall be computed based on the Tax Assumptions and shall be computed by assuming that at all times (A) the Owner Participant has sufficient federal taxable income to make full use of the tax benefits that are subject to the Tax Loss in the year in which all of such tax benefits were assumed to be available (and in future years with respect to tax benefits that result from the Tax Loss) and (B)(i) for purposes of calculating payments necessary to make such payment on an After-Tax Basis, and for purposes of calculating an amount or amounts in the case of an Inclusion Loss, the Owner Participant’s effective federal income tax rate is the highest marginal U.S. federal income tax rate applicable to corporations generally for the relevant period or periods and (ii) for all other purposes, the Owner Participant’s effective federal income tax rate is the Assumed Tax Rate. If the Owner Participant shall be required pursuant to a Final Determination to accrue Basic Lease Rent and Renewal Rent at a rate less accelerated than that assumed in the Tax Assumptions, then Midwest shall be permitted to defer the equity portion of Basic Lease Rent and adjust Termination Value, by such amounts and to such dates as shall preserve the Owner Participant’s Expected Return. In this regard, the Owner Participant agrees to use reasonable good faith efforts to file and diligently pursue a protective claim for refund with respect to any year as to which the IRS has challenged, pursuant to Section 467 of the Code, the rental deductions claimed by Midwest, if Midwest or EME shall so request.