Common use of Special and Regulatory Allocations Clause in Contracts

Special and Regulatory Allocations. (a) When required under the Treasury Regulations, items of income and gain shall be specially allocated to the Members in accordance with the qualified income offset provisions set forth in Treasury Regulation Section 1.704-1(b)(2)(ii)(d). Further, (i) any and all “partnership nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(b)(1)) for any fiscal year or other period shall be allocated to the Members in proportion to their respective Percentage Interests; (ii) any and all “partner nonrecourse deductions” (as defined in Treasury Regulation Section 1.704-2(i)(2)) attributable to any “partner nonrecourse debt” (as defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated to the Member who bears the “economic risk of loss” (as determined under Treasury Regulation Section 1.752-2) for such “partner nonrecourse debt” in accordance with Treasury Regulation Section 1.704-2(i)(l); (iii) each Member shall be specially allocated items of income and gain in accordance with the partnership minimum gain chargeback requirements set forth in Treasury Regulation Sections 1.704-2(f) and 1.704-2(g); and (iv) each Member with a share of the minimum gain attributable to any “partner nonrecourse debt” shall be specially allocated items of income and gain in accordance with the partner minimum chargeback requirements of Treasury Regulation Sections 1.704-2(i)(4) and 1.704-2(i)(5). Collectively, the allocations referenced in this Section 7.4.2.4(b) are the “Regulatory Allocations.” (b) This provision shall apply upon the repurchase, redemption, or liquidating distribution of any Preferred Units for any reason when the amounts required to be paid or distributed to any holder of those Preferred Units as set forth in the Certificate of Designations creating each series of Preferred Units exceeds the Capital Account balance of such holder after accounting for the allocations of Profits under Section 7.4.2.2 that would have occurred without the application of this Section 7.4.2.4(b). If the distribution to the holder required under the Certificate of Designations creating each series of Preferred Units would exceed the positive balance in the holder’s Capital Account, then, before any allocation of Profit occurs under Section 7.4.2.2, there shall be an allocation of items of income or gain to each such holder in an amount equal to the difference between the amount required to be distributed under the Certificate of Designations creating each series of Preferred Units and the holder’s Capital Account balance. (c) The Tax Matters Partner shall have the authority to make such offsetting special allocations of Company income, gain, loss or deduction in whatever manner it determines appropriate so that, after such offsetting allocations are made, each Member’s Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of the Agreement and all Company items were allocated consistent with Sections 7.4.2, 7.4.2.4(b) and 7.4.3.