Failure to Qualify Under IRC Section 883 Sample Clauses

Failure to Qualify Under IRC Section 883. Under the United States Internal Revenue Code of 1986, as amended (the “Tax Code”), 50% of the gross shipping income of a vessel owning or chartering corporation, such as Eagle, that is attributable to transportation that begins or ends, but that does not both begin and end, in the United States is characterized as United States source shipping income and such income is subject to a 4% United States federal income tax without allowance for any deductions, unless that corporation qualifies for exemption from tax under Section 883 of the Tax Code (“Section 883”) and the Treasury regulations promulgated thereunder. Eagle believes that, historically, it has qualified for an exemption pursuant to Section 883, and has taken that position for United States federal income tax return reporting purposes. However, there are factual circumstances beyond Eagle’s control that could cause Eagle to lose the benefit of this tax exemption after the Effective Date and thereby cause Eagle to become subject to United States federal income tax on its United States source shipping income. Due to the factual nature of the issues involved, there can be no assurance as to Eagle’s tax-exempt status or that of any of its subsidiaries. In addition, changes in the Code, the Treasury regulations, or the interpretation thereof by the Internal Revenue Service or the courts could adversely affect the Reorganized Debtor’s ability to take advantage of the exemption under Section 883. If the Reorganized Debtor is not entitled to this exemption under Section 883 for any taxable year, it would be subject for such taxable year to a 4% United States federal income tax on its United States source shipping income. The imposition of this taxation could have a negative effect on its business and would result in decreased earnings. For more information, please refer to Article XIII.B.1. “Exemption of Operating Income from United States Federal Income Taxation” and XIII.B.2. “Taxation in the Absence of Section 883 Exemption.”
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Related to Failure to Qualify Under IRC Section 883

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