Passive Foreign Investment Company Rules. If the Company were to constitute a PFIC (as defined below) for any year during a U.S. Holder’s holding period, then certain different and potentially adverse tax consequences would apply to such U.S. Holder’s acquisition, ownership and disposition of Units, Common Shares, Warrants, and Warrant Shares. The Company generally will be a PFIC under Section 1297 of the Code if, for a taxable year, (a) 75% or more of the gross income of the Company for such taxable year is passive income or (b) 50% or more of the assets held by the Company either produce passive income or are held for the production of passive income, based on the quarterly average of the fair market value of such assets. “Gross income” generally means all revenues less the cost of goods sold, and “passive income” includes, for example, dividends, interest, certain rents and royalties, certain gains from the sale of stock and securities, and certain gains from commodities transactions. Active business gains arising from the sale of commodities generally are excluded from passive income if substantially all of a foreign corporation’s commodities are (a) stock in trade of such foreign corporation or other property of a kind which would properly be included in inventory of such foreign corporation, or property held by such foreign corporation primarily for sale to customers in the ordinary course of business, (b) property used in the trade or business of such foreign corporation that would be subject to the allowance for depreciation under Section 167 of the Code, or (c) supplies of a type regularly used or consumed by such foreign corporation in the ordinary course of its trade or business. In addition, for purposes of the PFIC income test and asset test described above, if the Company owns, directly or indirectly, 25% or more of the total value of the outstanding shares of another corporation, the Company will be treated as if it (a) held a proportionate share of the assets of such other corporation and (b) received directly a proportionate share of the income of such other corporation. In addition, for purposes of the PFIC income test and asset test described above, “passive income” does not include any interest, dividends, rents, or royalties that are received or accrued by the Company from a “related person” (as defined in Section 954(d)(3) of the Code), to the extent such items are properly allocable to the income of such related person that is not passive income. Under certain attribution ru...
Passive Foreign Investment Company Rules. If we are classified as a passive foreign investment company, or a PFIC in any taxable year, a U.S. Holder will be subject to special rules generally intended to reduce or eliminate any benefits from the deferral of U.S. federal income tax that a U.S. Holder could derive from investing in a non-U.S. company that does not distribute all of its earnings on a current basis. A non-U.S. corporation will be classified as a PFIC for any taxable year in which, after applying certain look-through rules, either: • at least 75% of its gross income is passive income (such as interest income); or • at least 50% of its gross assets (determined on the basis of a quarterly average) is attributable to assets that produce passive income or are held for the production of passive income. We will be treated as owning our proportionate share of the assets and earning our proportionate share of the income of any other corporation, the equity of which we own, directly or indirectly, 25% or more (by value). Based on the market price of our ADSs, the value of our assets, and the composition of our assets and income, we do not believe we were a PFIC for the year ended December 31, 2019, and we do not expect to be a PFIC for the year ended December 31, 2020. However, the application of the PFIC rules is subject to uncertainty in several respects, and therefore, no assurances can be provided with respect to our PFIC status for the year ended December 31, 2019 or with regard to our PFIC status in the past, the current year or in the future. A separate determination must be made after the close of each taxable year as to whether we are a PFIC for that year. As a result, our PFIC status may change from year to year and we have not made any determination as to our expected PFIC status for the current year. The total value of our assets for purposes of the asset test generally will be calculated using the market price of the ADSs, which may fluctuate considerably. Fluctuations in the market price of the ADSs may result in our being a PFIC for the current or any future year. If we are classified as a PFIC in any year with respect to which a U.S. Holder owns ADSs, we will continue to be treated as a PFIC with respect to such U.S. Holder in all succeeding years during which the U.S. Holder owns the ADSs, regardless of whether we continue to meet the tests described above unless (i) we cease to be a PFIC and the U.S. Holder has made a “deemed sale” election under the PFIC rules, (ii) we cease ...
Passive Foreign Investment Company Rules. Under the Code, we will be a PFIC for any taxable year in which, after the application of certain “look-through” rules with respect to subsidiaries, either (i) 75% or more of our gross income consists of “passive income,” or (ii) 50% or more of the average quarterly value of our assets consists of assets that produce, or are held for the production of, “passive income.” For purposes of the above calculations, we will be treated as if we hold our proportionate share of the assets of, and directly receive our proportionate share of the income of, any other corporation in which we directly or indirectly own at least 25%, by value, of the shares of such corporation. Passive income generally includes interest, dividends, rents, certain non-active royalties and capital gains. Although we have not obtained independent valuations of our assets during 2020 and thus are not in a position to make a definitive determination as to whether we were a PFIC in 2020, based on our income and assets during 2020 and certain estimates and assumptions, including as to both the total value and the relative value of our assets as implied by our market capitalization during 2020, we believe that it is likely that we were a PFIC in 2020. In addition, it is possible that we may also be a PFIC in 2021 or one or more future years because, among other things, (i) we may not generate a substantial amount of non-passive gross income, for US federal income tax purposes, in any year, (ii) we currently own, and expect to continue to own, a substantial amount of passive assets, including cash, and (iii) the estimated valuation, for PFIC purposes, of our assets that generate non-passive income for PFIC purposes, including our intangible assets, is likely to be dependent in large part on our market capitalization and is therefore uncertain and may vary substantially over time. Accordingly, there can be no assurance that we will not be a PFIC in 2021 or any future taxable year. If we are a PFIC in 2021 or in any future year during which a US investor holds common shares, we generally would continue to be treated as a PFIC with respect to that US Holder for all succeeding years during which the US Holder holds common shares, even if we ceased to meet the threshold requirements for PFIC status. If we are a PFIC in 2021 or in any future year during which a US investor holds common shares (assuming such US Holder has not made a timely mark-to-market election, as further described below), any gain re...
Passive Foreign Investment Company Rules. The Code contains certain "anti-deferral" provisions applicable to foreign corporations that are treated as "passive foreign investment companies," or PFICs, for US federal income tax purposes. These provisions generally seek to reduce or eliminate the effect of the deferral of US taxes on certain undistributed earnings of such foreign corporations, with the result that in some cases income may be required to be recognised before an actual cash distribution is made. The Company would be classified as a PFIC for US federal income tax purposes if for any taxable year either: (i) 75 per cent. or more of the Company's gross income for the taxable year is passive income, or (ii) the average value of the Company's assets during the taxable year which produce passive income or which are held for the production of passive income is at least 50 per cent. of the average fair market value of all of the Company's assets for such year. Passive income for this purpose means, in general, dividends, royalties, rents (other than rents and royalties derived in the active conduct of a trade or business and not received from a related person), annuities, net gains from the sale or exchange of assets that produce passive income, net gains from commodities transactions, net gains from foreign currency transactions and income equivalent to interest. For the purpose of the PFIC test, if a foreign corporation owns directly or indirectly at least 25 per cent. by value of the share capital of another corporation, the foreign corporation is treated as owning its proportionate share of the assets of the other corporation, and directly receiving its proportionate share of the income of such other corporation. An actual determination of PFIC status is fundamentally factual in nature and generally cannot be made until the close of the applicable taxable year. Based upon the Company's review of its existing financial data for 2002 and projections for 2003, and the application of the US tax rules and regulations to these financial data and projections, the Company believes that it is not a PFIC for US federal income tax purposes and does not expect to become a PFIC. However, because this conclusion is a factual determination made annually and because there are uncertainties in the application of the relevant rules, the Company cannot assure you that the Company will not be considered a PFIC for any taxable year. Any change in the ownership structure or in the makeup of the Company's assets...
Passive Foreign Investment Company Rules. A non-U.S. corporation, such as Exscientia, will be classified as a “passive foreign investment company” (a “PFIC”) for U.S. federal income tax purposes if either (a) at least seventy-five percent (75%) of its gross income in a taxable year is “passive income” as that term is defined in the relevant provisions of the Code (e.g., certain dividends, interest, royalties, or gains on the disposition of certain minority interests), or (b) at least fifty percent (50%) of its assets in a taxable year (averaged quarterly over the year), including its pro rata share of the assets of any corporation in which it is considered to own at least 25% of the shares by value, are held for the production of, or produce, “passive income” (including cash and cash equivalents). Exscientia does not believe it was classified as a PFIC for its 2023 taxable year for U.S. federal income tax purposes, and does not expect to be classified as a PFIC for its 2024 taxable year or, if the Effective Time occurs in 2025, for its 2025 taxable year through the Effective Time. However, this conclusion is a factual determination that is made annually after the end of the applicable taxable year and is subject to interpretation and thus, no assurance can be given that Exscientia will not be a PFIC for the 2024 or 2025 taxable years or that Exscientia has not been a PFIC in the past. The determination of whether Exscientia is a PFIC is a fact-intensive determination made on an annual basis applying principles and methodologies that in some circumstances are unclear and subject to varying interpretation. For example, the total value of Exscientia’s assets (including goodwill) for PFIC testing purposes may be determined in part by reference to the market price of Exscientia’s ordinary shares or ADSs from time to time, which may fluctuate considerably and may depend on whether Exscientia is treated as a publicly traded corporation for these purposes for the relevant taxable year (e.g., if the Transaction closes during early 2025). Further, under the income test, Exscientia’s status as a PFIC depends on the composition of its income for the relevant taxable year. As a result, there can be no assurance that Exscientia will not be a PFIC for the current or any future taxable year. If Exscientia were classified as a PFIC for any taxable year during which a U.S. holder held Exscientia ADSs or Exscientia Shares and the U.S. holder had not timely made (i) a qualified electing fund election under Section 1...
Passive Foreign Investment Company Rules. PFIC Status of the Corporation S-23
Passive Foreign Investment Company Rules. PFIC Status of the Corporation
