Exhibit D-1
TAX ALLOCATION AGREEMENT
AMONG
GREAT PLAINS ENERGY INCORPORATED
AND SUBSIDIARIES
This Tax Allocation Agreement ("Agreement") is entered into as of October 1,
2001, by and among Great Plains Energy Incorporated ("GPE"), Kansas City
Power & Light Company, Great Plains Power Incorporated, Home Service
Solutions Inc., Worry Free Services, Inc., KLT Inc., KLT Investments Inc.,
KLT Investments II Inc., KLT Energy Services Inc., KLT Gas Inc., KLT Telecom
Inc., Energetechs, Inc., Advanced Measurement Solutions, Inc., FAR Gas
Acquisitions Corporation, KLT Gas Operating Company, WYMO Fuels, Inc., DTI
Holdings, Inc., Digital Teleport, Inc., Digital Teleport of Virginia, Inc.
and Kansas City Power & Light Receivables Company (collectively, the "members
of Group" or "Group" and individually "member of the Group" or "member").
WITNESSETH:
Whereas, the members of the Group are affiliated corporations within the
meaning of section 1504 of the Internal Revenue Code of 1986, as amended (the
"Code"), and will join in the annual filing of a consolidated federal income
tax return, and
Whereas, the members of the Group intend to allocate the consolidated income
tax liabilities and benefits to each member of the Group in a fair and
equitable manner, and
Whereas, the members of the Group intend to allocate the liabilities and
benefits arising from the Group's annual consolidated income tax returns in
compliance with 17 CFR 250.45(c) ("Rule 45(c)"), 26 CFR 1.1502-33(d)(2) and
Section 1552(a)(1) of the Code.
NOW, THEREFORE; the parties agree as follows:
1. DEFINITIONS
"Consolidated tax" is the aggregate current Federal income tax liability for
a tax year, being the tax shown on the consolidated Federal income tax return
and any adjustments thereto.
"Corporate taxable income" is the taxable income of a member of the Group for
a tax year, computed as though such member had filed a separate return on the
same basis as used in the consolidated return, except that dividend income
from associate companies shall be disregarded, and other intercompany
transactions eliminated in the consolidated return shall be given appropriate
effect.
"Corporate taxable loss" is the taxable loss of a member of the Group for a
tax year, computed as though such member had filed a separate return on the
same basis as used in the consolidated return, except that dividend income
from associate companies shall be disregarded, and other intercompany
transactions eliminated in the consolidated return shall be given appropriate
effect.
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"Separate return tax" is the tax on the corporate taxable income of a member
of the Group computed as though such company were not a member of a
consolidated group. If the separate return tax of a member of the Group is a
liability, it shall be referred to as a "positive separate return tax"; if it
is a refund or net tax benefit, it shall be referred to as a "negative
separate return tax".
2. ALLOCATION OF TAX LIABILITY
The consolidated tax shall be allocated among the members of the Group
consistent with Rule 45(c) of the Public Utility Holding Company Act of 1935,
in the following manner:
a. The consolidated tax before tax credits of the Group will be
allocated to each member of the Group with corporate taxable
income before tax credits on the basis of the ratio of their
corporate taxable income before tax credits to the total of
all members of the Group with corporate taxable income before
tax credits.
b. An additional amount of consolidated tax before tax credits will
be allocated to each member of the Group equal to the excess, if
any, of the positive separate return tax before tax credits of
each member of the Group for the year over the tax liability
allocated to such member under the previous paragraph.
c. The total additional amounts of consolidated tax before tax
credits allocated under this procedure will be credited to those.
members of the Group, excluding GPE, which had corporate taxable
losses, deductions or tax credits which serve to reduce the
consolidated tax. Thus, these members will be given the benefits
of the resulting reduction in the consolidated tax of the Group.
d. If GPE would have a negative separate return tax, then each member
having a positive separate return tax shall receive a negative
allocation in an amount equal to such negative separate return tax
multiplied by that member's share of the sum of the positive
separate return tax.
e. An allocation of the Alternative Minimum Tax ("AMT") will only be
performed when the consolidated return reflects an AMT liability.
In computing the allocation of the AMT, the same computation
methodology utilized in allocating the regular income tax will be
utilized. The consolidated AMT liability will be allocated to each
member of the Group with positive Alternative Minimum Taxable
Income ("AMTI") on the basis of the ratio of its AMTI to the total
of all members of the Group with positive AMTI. An additional
amount of AMT will be allocated to each member of the Group based
on the excess, if any, of the AMT liability that would have been
paid had the member of the Group filed a separate tax return for
the year over the AMT liability allocated to it under the previous
provision. The total additional amounts of AMT charged under
this provision will be allocated to each member of the Group
based on the ratio of its separate return AMTI to the total
AMTI of the members of the Group. In no event shall a member
of the Group be required to pay a
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greater amount of AMT for any period than it would have been
required to pay had it filed a separate income tax return for the
period. Any excess of the consolidated AMT allocated to a member
of the Group under this method over its separate return AMT will
be allocated among the other members of the Group using the
methodology described above. Any minimum tax credits available
for use in future periods will be allocated to the members of
the Group in the same ratio as the taxes which gave rise to the
credits. Minimum Tax Credits used in the consolidated return
will be deemed to have been utilized on a first-in, first-out
basis.
f. Any investment tax credits, other tax benefits and material items
taxed at rates other than the rate applicable to corporate taxable
income shall be allocated directly to the members of the Group
giving rise to them.
If the credit or benefit cannot be entirely utilized to offset
current consolidated tax, the consolidated credit carry back or
carry forward shall be apportioned to those members of the Group
giving rise to them in proportion to the relative amounts of
credits or benefits generated by each such member of the Group.
g. If the amount of consolidated tax allocated to any member of the
Group, excluding GPE, exceeds the separate return tax of such
member of the Group, such excess shall be reallocated among
those members of the Group whose allocated tax liability is less
than the amount of their respective separate return tax
liabilities. Any remaining unallocated tax liability shall be
assigned to GPE.
h. Pursuant to that certain Shareholders Agreement dated as of February
6, 2001, among KLT Telecom Inc., DTI Holdings, Inc. and Xxxxxxx X.
Xxxxxxxxx, the net operating losses incurred after February 8, 2001
by DTI Holdings, Inc., Digital Teleport, Inc. and Digital Teleport
of Virginia, Inc. (each an "Excluded Company") shall be allocated
to and used by KLT Telecom Inc., except to the extent the Excluded
Companies would otherwise have corporate taxable income in the same
tax year in which the members of the Group use such net operating
losses. KLT Telecom Inc. and the Excluded Companies acknowledge
that the Shareholders Agreement does not provide for, and does not
contemplate, reimbursement of any loss or credit availed of by KLT
Telecom Inc. or other members of the Group, and that such was part
of the bargained-for consideration to be received by KLT Telecom
Inc. in the transactions associated with the execution of the
Shareholders Agreement. Accordingly, the income, gain, loss,
deductions and credits of each of the Excluded Companies shall be
taken into account in the determination of KLT Telecom Inc.'s
apportioned obligation for the consolidated income tax under this
Agreement, and payments on account thereof shall solely be made
between GPE and KLT Telecom Inc. The obligations between KLT
Telecom Inc. and the Excluded Companies shall be controlled by the
Shareholders Agreement, and payments shall be made among such
parties in accordance with such agreement and consistent with this
Agreement.
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Subsequent to the execution of the Shareholders Agreement, KLT
Telecom Inc. and the Excluded Companies became subsidiaries of GPE,
a registered holding company. The terms and conditions of
Shareholders Agreement respecting tax allocations may be deemed
inconsistent with the requirements of Rule 45(c)(4), and KLT Telecom
Inc., the Excluded Companies and the other members of the Group
agree to seek any necessary Securities and Exchange Commission
authorization to allocate tax losses and credits as set forth in the
first paragraph of this Section h. Notwithstanding anything in the
first paragraph of this Section h. to the contrary, if required by
Rule 45(c)(4) and only to the extent required under Rule 45(c)(4)
the following paragraph shall be effective until such authorization
is received:
If an Excluded Company will not have a positive separate return
tax for a tax year, such Excluded Company shall be excluded from
the allocation of the consolidated tax liability and, thus, such
Excluded Company shall not receive any payment from KLT Telecom
Inc. as a result of any such loss or credit attributable to an
Excluded Company. If and when an Excluded Company would have
been able to utilize any previous losses or credits if, under the
applicable tax law, it had filed a tax return on a separate
basis, KLT Telecom Inc. shall pay to the appropriate Excluded
Company an amount equal to the refund which such Excluded Company
would have realized as a result of the carry over of such loss or
credit, with such amount payable by KLT Telecom Inc. in the year
in which such Excluded Company would have received the refund for
such loss or credit on a separate return basis.
If any amounts are deemed payable by KLT Telecom Inc. to an Excluded
Company pursuant to the preceding paragraph, the Excluded Companies
shall be deemed to have distributed any such amounts to KLT Telecom
Inc., to the extent any such amounts may properly be distributed to
KLT Telecom Inc. under state and Federal law.
i. In the event a corporation leaves the Group, it shall immediately
cease being a party to this Agreement and shall not be entitled to
any further payments or other benefits pursuant to this Agreement.
3. PAYMENT OF TAXES
a. Payment of the taxes for the period by each member of the Group will
represent the total taxes allocated to such member under the
principles described above. These payments will be made no less
frequently than annually and no more frequently than quarterly in
connection with the estimated tax installments.
b. A member of the Group with a net positive allocation shall pay GPE
the net amount allocated. A member of the Group with a net negative
allocation shall receive payment from GPE in the amount of the net
negative allocation. GPE shall pay or cause to be paid to the
Internal Revenue Service the Group's net current federal income tax
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liability from the net of the receipts and payments to and from
members of the Group.
c. GPE will make any calculations on behalf of the members of the Group
necessary to comply with the estimated tax provisions of Section
6655 of the Code. Based on such calculations, GPE shall charge the
members of the Group appropriate amounts at intervals consistent
with the dates in that section.
4. TAX ADJUSTMENTS
If the consolidated tax liability is adjusted for any taxable period, whether
by means of an amended return, claim for refund, after a tax examination by
the Internal Revenue Service or otherwise, the liability of each member of
the Group shall be recomputed to give effect to such adjustments. In the
case of a refund, GPE shall reimburse each member of the Group with its
allocable share of such refund within forty-five (45) business days of
receipt of such refund. In the case of an increase in tax liability, each
member of the Group shall pay to GPE it allocable share of such increased tax
liability with within forty-five (45) business days after receiving notice of
such liability from GPE.
5. INTER-PERIOD ADJUSTMENTS
If for any taxable year the Group has a net operating loss, a net capital
loss, or is entitled to any credits against tax that may be carried back or
forward to other year(s), the tax allocation for the other year(s) will be
recomputed to include these items. This recomputation shall treat the item
as if it existed in the year to which it was carried. Under this
recomputation, the regular income tax, tax credits, and alternative minimum
tax will be recomputed. Any prior allocation and payment of taxes between
the members of the Group shall be adjusted according to this revised
computation.
6. TERM OF AGREEMENT
This Agreement shall apply to the taxable year ending December 2001, and all
subsequent taxable periods unless the members of the Group agree to terminate
this Agreement. Notwithstanding such termination, this Agreement shall
continue in effect with respect to any payments or refunds due for all
taxable periods prior to termination. This Agreement may be amended from
time to time by the written consent of all members of the Group.
7. INCLUSION OF ACQUIRED OR CREATED SUBSIDIARY
The members of the Group will cause any corporation which becomes an
affiliated corporation within the meaning of Section 1504 of the Code to join
in this Agreement.
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8. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of any
successor to a member of the Group, whether by statutory merger, acquisition
of assets or otherwise, to the same extent that the successor would have been
required or eligible to be an original party to the agreement.
9. CHOICE OF LAWS
This Agreement shall be construed and enforced in accordance with the laws of
the State of Missouri, without giving effect to that State's conflict of laws
provisions.
10. PRIOR AGREEMENTS SUPERSEDED
This Agreement replaces and supersedes all prior agreements among the members
of the Group related to the subject matter hereof, including but not limited
to that certain Tax Sharing Agreement between Kansas City Power & Light
Company and Subsidiaries, dated as of March 31, 1994, as amended.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the first
above written.
Great Plains Energy Incorporated Great Plains Power Incorporated
By /s/ X. X. Xxxxxxxx By /s/ Xxxxxxx X. Xxxxxx
Kansas City Power & Light Company Home Service Solutions, Inc.
By /s/ X. X. Xxxxxxxx By /s/ Xxxx XxXxxxxxx
KLT Inc. KLT Energy Services Inc.
By /s/ Xxxxxxx X. Xxxxx By /s/ Xxxxxxx X. Xxxxx
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KLT Investments Inc. KLT Gas Inc.
By /s/ Xxxxx X. Xxxxxxxx By /s/ B. B. Selkirk
Xxxxx X. Xxxxxxx
President
KLT Investments II Inc. KLT Telecom Inc.
By /s/ Xxxxxxx X. Xxxxx By /s/ Xxxx X. Xxxxxxxxx
Worry Free Services, Inc. KLT Gas Operating Company
By /s/ Xxxx XxXxxxxxx By /s/ B. B. Selkirk
Xxxxx X. Xxxxxxx
President
FAR Gas Acquisitions Corporation DTI Holdings, Inc.
By /s/ B. B. Selkirk By /s/ Xxxx X. Xxxxxxxx
Xxxxx X. Xxxxxxx
President
Digital Teleport, Inc. Digital Teleport of Virginia, Inc.
By /s/ Xxxx X. Xxxxxxxx By /s/ Xxxx X. Xxxxxxxx
Energetechs, Inc. WYMO Fuels, Inc.
By /s/ X. X. Xxxxxx By /s/ X. X. Xxxxxxxx
Kansas City Power & Light Receivables
Company
By /s/ Xxxxxx X. Xxxxxxxx
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