Common use of Federal Excise Tax Clause in Contracts

Federal Excise Tax. A. The Reinsurer has agreed to allow for the purpose of paying the Federal Excise Tax the applicable percentage of the premium payable hereon (as imposed under Section 4371 of the Internal Revenue Code) to the extent such premium is subject to the Federal Excise Tax. The Reinsurer further agrees that, in the event a higher percentage of Federal Excise Tax is determined to be due at a later date, whether by the Company or as directed by an appropriate authority, it shall be liable for the difference between the original Federal Excise Tax paid and the newly determined Federal Excise Tax, in addition to any penalties applied and interest accrued. Notwithstanding the foregoing, the Reinsurer shall not be liable for any penalties applied and interest accrued if such penalties and/or interest arise from the Company's negligence. B. In the event of any return of premium becoming due hereunder the Reinsurer shall deduct the applicable percentage from the return premium payable hereon and the Company or its agent should take steps to recover the tax from the United States Government.