EXHIBIT 10.24
TAX ALLOCATION AGREEMENT
This TAX ALLOCATION AGREEMENT (Agreement), made and entered into as of October
15, 2003 and effective February 13, 2003 by and among Infinity Property and
Casualty Corporation ("Parent") and each one of those companies set forth herein
on Exhibit A attached hereto and incorporated herein by this reference
(hereinafter collectively referred to as "Subsidiaries").
Parent and Subsidiaries are members of an affiliated group of corporations (the
"AFFILIATED GROUP") within the meaning of section 1504(a) of the Internal
Revenue Code of 1986, as amended (the "CODE"). The Affiliated Group includes
Parent and Subsidiaries (individually, a "MEMBER" and collectively, the
"MEMBERS"). Pursuant to section 1501 of the Code and Regulations thereunder,
Members will elect to file a U.S. consolidated income tax return for the taxable
year beginning February 13, 2003 and ended December 31, 2003, and for each
subsequent taxable period in respect of which this Agreement is in effect and
for which the Affiliated Group is required or permitted to file a consolidated
tax return. Each Subsidiary shall execute and file such consent, elections, and
other documents that may be required or appropriate for the proper filing of
such returns. The Members deem it appropriate to define the method by which the
Federal income tax liability of the affiliated group shall be allocated among
them and the manner in which such allocated tax liability shall be paid.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter set forth and intending to be legally bound, the parties hereto
agree as follows:
1. Definitions: The following terms as used in this Agreement shall have
the meanings set forth below:
(a) "ALLOCATED TAX LIABILITY", in respect of a Member, shall mean
the amount (whether positive or negative) of tax (net all
credits) allocated to such Member pursuant to paragraph 2
hereof.
(b) "CONSOLIDATED RETURN" shall mean a consolidated Federal income
tax return filed by the Affiliated Group pursuant to section
1501 of the Code.
(c) "CONSOLIDATED TAX LIABILITY" shall mean the Federal income tax
liability as determined pursuant to Reg. section 1.1502-2 of
the Affiliated Group for any taxable year for which a
Consolidated Return is filed.
(d) "IRS" shall mean the Internal Revenue Service.
(e) "REGULATIONS" OR "REG." shall mean the Income Tax Regulations
promulgated under the Code and as in effect from time to time.
(f) "REASONABLE PERIOD OF TIME" shall mean a period of time not
exceeding 60 days in duration.
(g) "SUBSIDIARIES" shall mean all of the Members other than the
Parent.
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2. Allocation of Consolidated Tax Liability.
(a) Parent and Subsidiaries agree that the consolidated tax
liability for each year, determined in accordance with Income
Tax Regulation ("Regulation") 1.1502-2, shall be apportioned
among them in accordance with the provisions of Regulation
1.1502-33(d)(3) in conjunction with the method described in
Regulation 1.1552-1(a)(2) and allocated pursuant to the
following:
(i) Consolidated Tax Liability is determined and
allocated to Members with positive tax liabilities.
Consolidated Tax Liability is allocated in the ratio
of the Member's separate tax liability to the total
separate return tax liability of all Members with
positive tax liabilities.
(ii) An additional amount is allocated to each Member in
2(a)(i) equal to 100% of the excess of the Member's
separate return tax liability for the year over the
amount allocated to the Member under 2(a)(i) above.
(iii) The total of the amounts allocated under 2(a)(ii)
above is credited to Members who incurred net
operating losses or credits which were not utilizable
by such Member on a separate return basis but were
available to the Members with taxable income. Amounts
credited under this subparagraph shall be allocated
in a manner that reasonably reflects the absorption
of the Member's tax attributes.
3. Payments. Each subsidiary shall pay to the Parent amounts allocated
pursuant to paragraph 2(a)(i) and 2(a)(ii) above. Payments under this
paragraph shall be made within a Reasonable Period of Time after
receiving request for payment from Parent.
(a) The Parent shall pay to each Subsidiary with excess tax
credits or losses during the taxable year the amounts
allocated pursuant to paragraph 2(a)(iii) above to the extent
actually used in the Consolidated Return. Payments under this
paragraph shall be made within a Reasonable Period of Time
after the date of filing the Consolidated Return for such
taxable year. Once the Subsidiary has been paid for its
credits or losses, it cannot use such credits or losses in
calculating its separate return tax liability under paragraph
2 above. Any of the Subsidiary's credits or losses which are
not used in the Consolidated Return and for which it has not
been paid shall be retained by the Subsidiary for possible
future use.
(b) Payment of the Consolidated Tax Liability for a taxable period
shall include the payment of estimated tax due on or before
the required installment due dates for such taxable year
(Estimated Tax Installment). Parent shall or shall cause the
Members to estimate the Consolidated Tax Liability (or, if
applicable, the alternative minimum tax which may be imposed
on the Affiliated Group) and each Member's Allocated Tax
Liability for purposes of each Estimated Tax Installment. Each
Subsidiary shall pay to the Parent its share of the Estimated
Tax Installments within a Reasonable Period of Time after
receiving request for payment from Parent and after taking
into consideration Estimated Tax Installments previously made
for the taxable year. Any overpayment of the Estimated Tax
Installment will be refunded to the Subsidiary within a
Reasonable Period of Time after the installment due date for
such taxable year.
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(c) Payment of the Consolidated Tax Liability for a taxable period
shall include the extension request payment due under the
Code. Parent shall or shall cause the Members to estimate the
Consolidated Tax Liability (or, if applicable, the alternative
minimum tax which may be imposed on the Affiliated Group) and
each Member's Allocated Tax Liability for purposes of an
extension of time for filing the Consolidated Return
(Consolidated Return Extension). Within a Reasonable Period of
Time after receiving request for payment from Parent of the
Consolidated Return Extension, each of the Subsidiaries shall
pay to the Parent or the Parent shall pay to each of the
Subsidiaries, as the case may be, the difference (if any)
between the sum of such Subsidiary's Allocated Tax Liability
as calculated for the Consolidated Return Extension request
and all Estimated Tax Installments thereof previously paid by
or to such Subsidiary.
(d) Within a Reasonable Period of Time after receiving request for
payment from Parent of the tax due for the Consolidated
Return, each of the Subsidiaries shall pay to the Parent or
the Parent shall pay to each of the Subsidiaries, as the case
may be, the difference (if any) between such Subsidiary's
actual Allocated Tax Liability and all Estimated Tax
Installments and the Consolidated Return Extension amounts
previously paid by or to such Subsidiary for such taxable
year.
(e) Parent shall have the responsibility and authority to make or
cause to be made all Estimated Tax Installments, Consolidated
Return Extension and Consolidated Return deposits of the
Consolidated Tax Liability or alternative minimum tax, as the
case may be, and shall collect all refunds thereof.
4. Alternative Minimum Tax. The provisions of paragraphs 2 and 3 shall not
apply to any consolidated alternative minimum tax ("AMT") liability
determined in accordance with Code Section 55.
(a) The Parent and Subsidiaries agree that any AMT incurred on a
consolidated basis by the Affiliated Group shall be allocated
among the Members of the Affiliated Group. The consolidated
liability for AMT shall be individually allocated to each
member in the proportion that each Member's separate AMT tax
liability for such tax has to the total of all such separate
AMT tax liabilities. Each Subsidiary shall pay to the Parent
its share of such tax liability as determined under this
paragraph. The tax liability of each Subsidiary under this
paragraph shall not exceed the amount such Subsidiary would
have paid if it had filed on a separate return basis.
(b) The Parent and Subsidiaries agree that if the Consolidated Tax
Liability is reduced by the AMT credit (as defined in section
53 of the Code) the amount of such reduction shall be
allocated among the Members of the Affiliated Group. The
consolidated AMT credit shall be individually allocated to
each member in the proportion that each Member's separate
return tax liability for such tax has to the total of all such
separate return tax liabilities.
5. Subsequent Adjustments. If any adjustments are made to the income,
gains, losses, deductions, or credits of the Affiliated Group, whether
by reason of the filing of an amended return or a claim for refund with
respect to such taxable year, a change in law, or an examination by the
IRS with respect to such taxable year, the amounts due under this
Agreement for such taxable year shall be re-determined by taking into
account such adjustments. If, as a result of such re-determination, any
amounts under this Agreement shall differ from the amounts previously
paid, then payments of such difference shall be made (a) in the case of
an adjustment resulting in a credit or refund, within a Reasonable
Period of Time after the date on which such credit or refund is
received with
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respect to such adjustment, or (b) in the case of an adjustment
resulting in the assertion of a deficiency, within a Reasonable Period
of Time after receiving request for payment from Parent of such
deficiency. Any amount due under this paragraph 4 shall include any
interest attributable thereto under sections 6601 and 6611 of the Code,
as the case may be, and any penalties or additional amounts which may
be imposed.
6. Determinations. All determinations required hereunder shall be made by
the Tax Department of the Parent, and such determinations shall be
binding and conclusive upon all Members for purposes thereof.
7. Procedural Matters.
(a) The Parent shall prepare or cause to be prepared and file the
Consolidated Return and any other returns, documents or
statements required to be filed or prepared with respect to
the Consolidated Return and to the determination of the
Consolidated Tax Liability (or AMT liability). Each Subsidiary
shall deliver to the Parent before such date as is reasonably
determined by the Tax Department of the Parent all data
required for preparation of the Consolidated Return and the
determinations required hereby.
(b) In its sole discretion, the Parent shall have the right with
respect to any Consolidated Return (a) to determine (i) the
manner in which such Consolidated Return and all related
documents or statements shall be prepared and filed,
including, without limitation, the manner in which any item of
income, gain, loss, deduction, or credit shall be reported and
(ii) whether any extension may be requested; (b) to contest,
compromise or settle any adjustment or deficiency proposed,
asserted or assessed as a result of any examination by the
IRS; (c) to file, prosecute, compromise or settle any claim
for refunds; and (d) to determine whether any refunds shall be
paid by way of refund or credited against the Consolidated Tax
Liability (or AMT liability). Each Member hereby irrevocably
appoints the Parent as its agent and attorney-in-fact to take
such action (including the execution of documents) as the
Parent may deem appropriate to effect the foregoing.
8. State Taxes.
(a) To the extent the privilege of filing consolidated state tax
returns is available and the Parent determines in its sole
discretion that the filing of such return is advantageous, the
eligible Members shall file consolidated state tax returns,
and the terms of this Agreement shall apply to such eligible
Members as if this Agreement were directed toward the filing
of such consolidated state income tax returns.
(b) To the extent a Member is not required or elects not to file a
consolidated state tax return, the Parent shall prepare or
cause to be prepared and file the separate state tax return
and any other documents or statements required to be filed or
prepared with respect to the separate state tax return. Each
Subsidiary shall deliver to the Parent before such date as is
reasonably determined by the Tax Department of the Parent all
data required for preparation of the consolidated or separate
state tax returns and the determinations required hereby.
(c) In its sole discretion, the Parent shall have the right with
respect to consolidated or separate state tax returns (a) to
determine (i) the manner in which such consolidated or
separate state tax returns and all related documents or
statements shall be prepared and filed, including, without
limitation, the manner in which any item of income, gain,
loss, deduction, or credit
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shall be reported and (ii) whether any extension may be
requested; (b) to contest, compromise or settle any adjustment
or deficiency proposed, asserted or assessed as a result of
any examination by any state tax authority; (c) to file,
prosecute, compromise or settle any claim for refunds; and (d)
to determine whether any refunds shall be paid by way of
refund or credited against the consolidated or separate state
tax liability. Each Member hereby irrevocably appoints the
Parent as its agent and attorney-in-fact to take such action
(including the execution of documents) as the Parent may deem
appropriate to effect the foregoing.
(d) Each Subsidiary shall pay to the Parent its share of the
consolidated state tax liability calculated within a
Reasonable Period of Time after receiving request for payment
from Parent. Any overpayment will be refunded to the
Subsidiary within a Reasonable Period of Time after receipt by
the Parent of such refund. Subsidiary shall reimburse any
Member within a Reasonable Period of Time after receiving
request for payment by Member of separate state tax liability
payment made on behalf of such Subsidiary.
9. Miscellaneous Provisions:
(a) Authority to Change Adjustments. Each of the Members hereby
agrees that the Parent shall have the authority to make any
necessary alterations in this Agreement to comply with any
changes in the provisions of the Code or Regulations relating
to consolidated income tax returns.
(b) Consent to Regulations. Each of the Members consents to all
Regulations relating to the filing of a consolidated income
tax return.
(c) Binding Agreement: Additional Parties/Participants. If, during
a consolidated return period, the Parent or any Subsidiary
acquires or organizes another corporation that is required to
be included in the consolidated return, then such corporation
shall join in and be bound by this Agreement without any
further action by the signatories to the Agreement. Any
corporation that becomes a member of the Affiliated Group,
that respectively becomes or is eligible under the Code to
participate in the consolidated tax return, will execute an
addendum indicating it's election to become a party to this
Agreement and specify the taxable year of inclusion in the
consolidated tax return.
(d) Terms of Agreement. This Agreement shall remain in effect for
so long as two (2) or more of the Members continue to qualify
as Members of the Affiliated Group. Additionally, the Parent
may terminate this Agreement as it relates to a particular
Subsidiary upon the sale, disposition or other transaction
that ceases the Subsidiary's membership in the Affiliated
Group.
(e) Subsequent Alterations and Modifications. Subject to the
rights of the Parent to modify the provisions of this
agreement for purposes of conforming to the applicable
provisions of the Code or Regulations and except as provided
in paragraphs 9(c) and 9(d) above, all alterations and
modifications of this Agreement shall be in writing and signed
by all parties.
(f) Elections. Each of the Members hereby agrees that the Parent
shall have the authority to make any or all elections,
including accounting methods, that are available to the
Subsidiary or Affiliated Group under the Code or Regulations
and requested by the Parent to minimize the Consolidated Tax
Liability (or AMT liability).
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(g) Termination. This Agreement will not apply to taxable years of
any Member commencing on or after such time as such Member is
no longer included in the Affiliated Group.
(h) Conduct of Examination. Each of the Members agrees that the
Parent shall be solely responsible for the conduct and
disposition of any IRS or State tax examination of the
Affiliated Group. In the event Subsidiary is no longer part of
the Affiliated Group and except as otherwise delegated by
Parent, Parent is solely responsible for the active conduct
and disposition of any IRS or State tax examination of such
Subsidiary for periods such Subsidiary was a Member of the
Affiliated Group. All costs and expenses of the IRS or State
tax examination, including the expense of defending any
adjustments or proposed adjustments that are directly
identifiable with a particular Member, shall be billed to such
Member. All costs and expenses not specifically identifiable
with a particular Member shall be borne and paid by each
Member on an equitable basis determined by the Parent.
(i) Authority to Settle Examination. Each Subsidiary hereby waives
any and all present and future claims against the Parent
relating to any compromise, arrangement or other agreement
between the Parent and the IRS based on an allegation that
such compromise, arrangement or agreement improperly causes a
misstatement of its Allocated Tax Liability or that such
Subsidiary could have reached a more favorable agreement with
the IRS on a separate company basis.
(j) Foreign taxes. The Parent shall prepare or cause to be
prepared any foreign tax returns, related foreign tax
attributes and any excise tax returns that may be required by
any Subsidiary. Subsidiary shall reimburse any Member within a
Reasonable Period of Time after request for payment by such
Member of any such foreign or excise tax for payments made by
Member on behalf of such Subsidiary.
(k) Carrybacks. Subsidiaries waive the right to carryback any tax
attribute to a year in which they were not members of the
Affiliated Group.
(l) Tax proceedings. In the event Subsidiary is no longer a member
of the Affiliated Group, Subsidiary shall have the right to
participate in, but not control, at their own expense, a tax
proceeding to the extent such tax proceeding relates to a tax
period Subsidiary was a member of the Affiliated Group, and to
employ counsel of its choice at its expense. If Parent shall
not assume the defense of such tax proceeding, then Subsidiary
may assume control over such tax proceeding, at its own
expense.
(m) Deferred taxes. The Parent shall prepare or cause to be
prepared separate company and consolidated deferred tax
calculations for purposes of Generally Accepted Accounting
Principles (GAAP). The Parent shall prepare or cause to be
prepared separate company deferred tax calculations for
purposes of Statutory Accounting Practices (SAP). Each
Subsidiary shall deliver to the Parent before such date as is
reasonably determined by the Tax Department of the Parent all
data required for preparation of GAAP and SAP deferred tax
calculations.
(n) Governing law. This Agreement and the rights and obligations
of the parties under this Agreement shall be governed by, and
construed and interpreted in accordance with the law of the
State of Ohio.
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IN WITNESS WHEREOF, each of the parties hereto had caused this Agreement to be
duly executed as of the date set forth above.
WITNESSES: INFINITY PROPERTY AND
CASUALTY CORPORATION
By:
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Xxxxx Xxxxx, Senior Vice President
Date:
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