Common use of Indemnification for Contributions in Aid of Construction Clause in Contracts

Indemnification for Contributions in Aid of Construction. The Parties intend that all payments made by Customers to Transmission Owner for the installation of the CUU shall be non-taxable contributions to capital in accordance with the Internal Revenue Code and any applicable state tax laws and shall not be taxable as contributions in aid of construction under the Internal Revenue Code and any applicable state tax laws. With regard only to such contributions, Transmission Owner shall not include a gross-up for income taxes in the amounts it charges Customers for the installation of the CUU unless (i) Transmission Owner has determined, in good faith, that the payments or property transfers made by Customers to Transmission Owner should be reported as income subject to taxation or (ii) any Governmental Authority directs Transmission Owner to report payments or property as income subject to taxation; provided, however, that Transmission Owner may require Customers to provide security for Interconnection Facilities, in a form reasonably acceptable to Transmission Owner (such as a parental guarantee or a letter of credit), in an amount equal to the cost consequences or any current tax liability under this Article. Customers shall reimburse Transmission Owner for such costs on a fully grossed-up basis, in accordance with this Article within thirty (30) Calendar Days of receiving written notification from Transmission Owner of the amount due, including detail about how the amount was calculated. The indemnification obligation shall terminate at the earlier of (1) the expiration of the ten-year testing period and the applicable statute of limitation, as it may be extended by Transmission Owner upon request of the IRS, to keep these years open for audit or adjustment, or (2) the occurrence of a subsequent taxable event and the payment of any related indemnification obligations as contemplated by this Article. Notwithstanding the foregoing provisions of this Article 3.3.1, and to the extent permitted by law, to the extent that the receipt of such payments by Transmission Owner is determined by any Governmental Authority to constitute income by Transmission Owner subject to taxation, Customers shall jointly and severally, but preserving all rights of contribution, protect, indemnify and hold harmless Transmission Owner and its Affiliates, from all claims by any such Governmental Authority for any tax, interest and/or penalties associated with such determination. Upon receiving written notification of such determination from the Governmental Authority, Transmission Owner shall provide each Customer with written notification within thirty (30) Calendar Days of such determination and notification. Transmission Owner, upon the timely written request by any one or more of Customers and at the expense of such requesting Customer(s), shall appeal, protest, seek abatement of, or otherwise oppose such determination. Transmission Owner reserves the right to make all decisions with regard to the prosecution of such appeal, protest, abatement or other contest, including the compromise or settlement of the claim; provided that Transmission Owner shall cooperate and consult in good faith with the requesting Customer(s) regarding the conduct of such contest. Customer(s) who requested the action shall advance to Transmission Owner on a periodic basis as requested by Transmission Owner the estimated cost of prosecuting such appeal, protest, abatement or other contest. Customer(s) shall not be required to pay Transmission Owner for the tax, interest and/or penalties prior to the seventh (7th) Calendar Day before the date on which Transmission Owner (i) is required to pay the tax, interest and/or penalties or other amount in lieu thereof pursuant to a compromise or settlement of the appeal, protest, abatement or other contest; (ii) is required to pay the tax, interest and/or penalties as the result of a final, non-appealable order by a Governmental Authority; or (iii) is required to pay the tax, interest and/or penalties as a prerequisite to an appeal, protest, abatement or other contest. In the event such appeal, protest, abatement or other contest results in a determination that Transmission Owner is not liable for any portion of any tax, interest and/or penalties for which any Customer has already made payment to Transmission Owner, Transmission Owner shall promptly refund to such Customer any payment attributable to the amount determined to be non-taxable, plus any interest or other payments Transmission Owner receives or to which Transmission Owner may be entitled with respect to such payment. In accordance with Article 6, each Customer shall provide Transmission Owner with credit assurances sufficient to meet such Customer’s estimated liability for reimbursement of Transmission Owner for taxes, interest and/or penalties under this Section 3.3.1. Such estimated liability shall be stated in Appendix A. To the extent that Transmission Owner is a limited liability company and not a corporation, and has elected to be taxed as a partnership, then the following shall apply: Transmission Owner represents, and the Parties acknowledge, that Transmission Owner is a limited liability company and is treated as a partnership for federal income tax purposes. Any payment made by Customer to Transmission Owner for the CUU is to be treated as an upfront payment in accordance with Rev Proc 2005-35. It is anticipated by the Parties that certain amounts paid by each Customer to Transmission Owner for the CUU will be reimbursed to such Customer in accordance with the terms of this Agreement, provided such Customer fulfills its obligations under this Agreement.

Indemnification for Contributions in Aid of Construction. The Parties intend that all payments made by Customers Customer to Transmission Owner for the installation of the CUU Network Upgrades and System Protection Facilities shall be non-taxable contributions to capital in accordance with the Internal Revenue Code and any applicable state tax laws and shall not be taxable as contributions in aid of construction under the Internal Revenue Code and any applicable state tax laws. With regard only to such contributions, Transmission Owner shall not include a gross-up for income taxes in the amounts it charges Customers Customer for the installation of the CUU Network Upgrades and System Protection Facilities unless (i) Transmission Owner has determined, in good faith, that the payments or property transfers made by Customers Customer to Transmission Owner should be reported as income subject to taxation or (ii) any Governmental Authority directs Transmission Owner to report payments or property as income subject to taxation; provided, however, that Transmission Owner may require Customers Customer to provide security for [Interconnection Facilities] [Connection Facilities], in a form reasonably acceptable to Transmission Owner (such as a parental guarantee or a letter of credit), in an amount equal to the cost consequences or any current tax liability under this Article. Customers Customer shall reimburse Transmission Owner for such costs on a fully grossed-up basis, in accordance with this Article Article, within thirty (30) Calendar Days of receiving written notification from Transmission Owner of the amount due, including detail about how the amount was calculated. The indemnification obligation shall terminate at the earlier of (1) the expiration of the ten-year testing period and the applicable statute of limitation, as it may be extended by Transmission Owner upon request of the IRS, to keep these years open for audit or adjustment, or (2) the occurrence of a subsequent taxable event and the payment of any related indemnification obligations as contemplated by this Article. Notwithstanding the foregoing provisions of this Article 3.3.1, and to the extent permitted by law, to the extent that the receipt of such payments by Transmission Owner is determined by any Governmental Authority to constitute income by Transmission Owner subject to taxation, Customers Customer shall jointly and severally, but preserving all rights of contribution, protect, indemnify and hold harmless Transmission Owner and its Affiliates, from all claims by any such Governmental Authority for any tax, interest and/or penalties associated with such determination. Upon receiving written notification of such determination from the Governmental Authority, Transmission Owner shall provide each Customer with written notification within thirty (30) Calendar Days of such determination and notification. Transmission Owner, upon the timely written request by any one or more of Customers Xxxxxxxx and at the expense of such requesting Customer(s)Customer’s expense, shall appeal, protest, seek abatement of, or otherwise oppose such determination. Transmission Owner reserves the right to make all decisions with regard to the prosecution of such appeal, protest, abatement or other contest, including the compromise or settlement of the claim; provided that Transmission Owner shall cooperate and consult in good faith with the requesting Customer(s) Customer regarding the conduct of such contest. Customer(s) who requested the action Customer shall advance to Transmission Owner on a periodic basis as requested by Transmission Owner the estimated cost of prosecuting such appeal, protest, abatement or other contest. Customer(s) Customer shall not be required to pay Transmission Owner for the tax, interest and/or penalties prior to the seventh (7th) Calendar Day before the date on which Transmission Owner (i) is required to pay the tax, interest and/or penalties or other amount in lieu thereof pursuant to a compromise or settlement of the appeal, protest, abatement or other contest; (ii) is required to pay the tax, interest and/or penalties as the result of a final, non-appealable order by a Governmental Authority; or (iii) is required to pay the tax, interest and/or penalties as a prerequisite to an appeal, protest, abatement or other contest. In the event such appeal, protest, abatement or other contest results in a determination that Transmission Owner is not liable for any portion of any tax, interest and/or penalties for which any Customer has already made payment to Transmission Owner, Transmission Owner shall promptly refund to such Customer any payment attributable to the amount determined to be non-taxable, plus any interest or other payments Transmission Owner receives or to which Transmission Owner may be entitled with respect to such payment. In accordance with Article 6, each Customer shall provide Transmission Owner with credit assurances sufficient to meet such Customer’s estimated liability for reimbursement of Transmission Owner for taxes, interest and/or penalties under this Section 3.3.1. Such estimated liability shall be stated in Appendix A. To the extent that Transmission Owner is a limited liability company and not a corporation, and has elected to be taxed as a partnership, then the following shall apply: Transmission Owner represents, and the Parties acknowledge, that Transmission Owner is a limited liability company and is treated as a partnership for federal income tax purposes. Any payment made by Customer to Transmission Owner for the CUU Network Upgrades and System Protection Facilities is to be treated as an upfront payment in accordance with Rev Proc 2005-35. It is anticipated by the Parties that certain any amounts paid by each Customer to Transmission Owner for the CUU Network Upgrades and System Protection Facilities will be reimbursed to such Customer in accordance with the terms of this Agreement, provided such Customer fulfills its obligations under this Agreement.