EXHIBIT F
KEYSPAN CORPORATION
AND ITS SUBSIDIARIES
AGREEMENT FOR FILING CONSOLIDATED FEDERAL INCOME
TAX RETURNS AND FOR ALLOCATION OF CONSOLIDATED
FEDERAL INCOME TAX LIABILITIES AND BENEFITS
DATED SEPTEMBER 28, 2000
KeySpan Corporation ("KSE" or "Parent") and its Subsidiaries (each a
"Member" and collectively referred to as "the Parties" or "the Group" and set
forth in Exhibit 1 ) hereby agree to annually join in the filing of a
consolidated Federal income tax return and to allocate the consolidated Federal
income tax liabilities and benefits among the members of the consolidated group
in accordance with the provisions of this Agreement in the manner prescribed
below, which is consistent with Rule 45(c) of the Public Utility Holding Company
Act of 1935. Similarly, where applicable, the Parties agree to allocate any
State consolidated, combined or unitary tax liabilities and benefits among
members of the State combined group in accordance with this Agreement. This
Agreement deals with the allocation of cash, earnings and profits, and
investment basis. For financial statement purposes, the tax provisions are
recorded on a separate company basis in accordance with generally accepted
accounting principles ("GAAP").
1. Parties to the Agreement
The Parties to this Agreement and the signatures of their corporate
officers approving this Agreement are attached as Exhibit 2. When required,
the Exhibits shall be modified from time to time to reflect changes in the
consolidated group, with no effect on the basic Agreement.
KSE will act as the agent for all Parties to this Agreement with respect to
payments made to or cash received from the Internal Revenue Service or to
or from any party to this Agreement.
2. Definitions
"Alternative minimum tax" is the tax imposed by Internal Revenue Code
Section 55 and shown on Form 4626, Alternative Minimum Tax - Corporations,
on a separate or consolidated Federal income tax return.
"Alternative minimum tax credit" is the credit allowed by Internal Revenue
Code Section 53 and shown on Form 8827, Credit For Prior Years' Alternative
Minimum Tax, on a separate or consolidated Federal income tax return.
"Consolidated tax" is the aggregate current Federal income tax liability
for a tax year, excluding the alternative minimum tax and alternative
minimum tax credits. It is the tax shown on the consolidated Federal income
tax return including any amended returns relating to the
same year. If a refund is due on the consolidated Federal income tax return
or any amended returns relating to the same year, the consolidated tax for
the tax year will be the tax less the refund amount.
"Consolidated taxable income" is the aggregate taxable income of the
Parties to this Agreement for a tax year computed as though the Group had
filed a separate Federal income tax return on the same basis as used in the
consolidated Federal income tax return.
"Consolidated taxable loss" is the aggregate taxable loss of the Parties to
this Agreement for a tax year computed as though the Group had filed a
separate Federal income tax return on the same basis as used in the
consolidated Federal income tax return.
"Separate return tax" is the tax on the corporate taxable income of a Party
to this Agreement, including the effect of any particular feature of the
tax law, differences in tax rates, investment tax credits, etc., applicable
to it. Separate return tax may be either positive or negative.
"Separate return taxable income" is the taxable income of a Party to this
Agreement for a tax year, computed as though such party had filed a
separate return on the same basis as used in the consolidated return,
giving effect to intercompany transactions in the consolidated return in
accordance with Treasury Regulations 1.1502-13, except that dividend income
from any party shall be disregarded.
"Separate return taxable loss" is the taxable loss of a party to this
Agreement for a tax year, computed as though such party had filed a
separate return on the same basis as used in the consolidated return giving
effect to intercompany transactions in the consolidated return in
accordance with Treasury Regulations 1.1502-13, except that dividend income
from any party shall be disregarded.
3. Tax Allocation Procedures
The Parties agree to allocate tax liability as follows:
A. General Rule: The Federal consolidated tax shall be apportioned among
the Members of the Group in accordance with Treasury
Regulations,ss.ss.1.1552-1(a)(2) and 1.1502-33(d)(3), utilizing the
"separate return tax" method in the manner prescribed below:
Step 1 - The federal consolidated tax liability of the Group (not
including any liability for alternative minimum tax) shall be
apportioned among the Members of the Group in the ratio that each
Member's separate taxable income bears to the sum of the separate
taxable incomes of all Members having taxable income.
1) Intercompany eliminations recorded by consolidation entries that
affect the consolidated tax will be assigned to the appropriate
member necessitating the intercompany elimination for the purpose
of computing separate return tax.
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2) General business credits, non-conventional fuel credits and
capital losses will be allocated to the Member that generated the
credits or capital losses on a separate return basis. Credits and
capital losses not utilized in the current year are allocated to
the Member that generated these items when they are utilized
either by carryback or carryforward in the consolidated Federal
income tax return.
3) Any Parent corporation gain or loss realized from its sale of its
interest in subsidiaries' securities shall be assigned to Parent
and will not be allocated to other Members. Parent shall also be
deemed to have corporate tax benefits with regard to that portion
of its losses, credits or other tax benefits that arise from
taking into account items attributable to acquisition related
debt. All other Parent corporation negative separate return tax
will be allocated currently to positive separate return tax
Members on the ratio of their positive separate return tax to the
total positive separate return tax. See Step 3, infra.
Step 2 - An additional liability amount will be allocated to Members of
the Group equal to 100% of the excess of the Member's separate tax
liability over the consolidated tax liability allocated to the Member
under Step 1. Under no circumstances shall the amount of tax or other
liability allocated to a Member under this Agreement exceed its
separate tax liability.
Step 3 -- The total of the amounts allocated under Step 2 is credited
pursuant to a consistent method to those Members of the Group who had
losses, credits or other net tax benefits included in the consolidated
return, (referred to as "corporate tax benefits") as follows, except
that for the purposes of this Step 3, Parent shall be deemed to have
corporate tax benefits only with regard to that portion of its losses,
credits or other tax benefits that arise from taking into account items
attributable to sale of its interest in subsidiaries' securities or to
acquisition related debt.
(a) If all corporate tax benefits reduce the amount of tax due in the
consolidated return of the Group, each Member of the Group having
corporate tax benefits will be allocated the value thereof. The
value of net operating losses shall generally be determined by
applying the then current corporate income tax rate to the amount
of the loss, and the value of a credit shall generally equal 100%
of the credit utilized.
(b) If the total of the corporate tax benefits is greater than the
total reduction in the consolidated tax of the Group, then the
benefits arising from the inclusion of negative taxable incomes
in the consolidated return shall be recognized and paid prior to
the benefits arising from credits or other benefits.
(c) If the corporate tax benefits attributable to Members of the
Group with negative taxable incomes are not absorbed in the
consolidated return, the benefit allocated to each such Member of
the Group shall be in proportion to their respective negative
taxable incomes.
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(d) If the corporate tax benefits attributable to credits or other
net tax benefits are not fully applied in the consolidated return
of the Group, the benefits arising from credits shall be
recognized and paid prior to the benefits arising from other
benefits.
(e) If the corporate tax benefits attributable to Members of the
Group with credits are not absorbed in the consolidated return of
the Group, the benefits allocated to each Member company shall be
in proportion to their respective credits.
(f) If the corporate tax benefits attributable to Members of the
Group with other benefits are not absorbed in the consolidated
return of the Group, the benefit allocated to each Member company
shall be in proportion to their respective other benefits.
Step 4 - If the total consolidated tax liability results in an
alternative minimum tax ("AMT") liability, as imposed by Internal
Revenue Code ss.55(a), then any consolidated AMT will be allocated to
the Members of the Group (applying the tax allocation procedures of
this Section 3) based on the ratio of their separate return alternative
minimum tax to the aggregate of all members having separate return
alternative minimum tax.
Step 5 - If the total consolidated return liability results in
consolidated minimum tax credit utilization, the consolidated minimum
tax credit shall be tentatively allocated to each company participating
in the consolidated return in an amount equal to the lesser of (1) each
company's separate Minimum Tax Credit Carryforward or (2) the excess of
such company's allocated regular tax over its separate alternative
minimum tax ("AMT"). Minimum Tax Credit Carryforward for this purpose
is the sum of the annual amounts of consolidated AMT allocated to a
company in prior years less the sum of the consolidated minimum tax
credits allocated to that company in prior years. If the total of such
tentative allocations exceeds the consolidated minimum tax credit
utilized in the current taxable year, then the difference between the
total of the tentative allocations and the consolidated minimum tax
credit utilized for the taxable year shall be allocated as a negative
amount to each company in proportion to that company's tentative
allocation to the combined total of all such amounts. If the total of
the tentative allocations is less than the consolidated minimum tax
credit utilized, the difference between the consolidated minimum tax
credit utilization and the total of the tentative allocations shall be
allocated to each company in proportion to that company's remaining
Minimum Tax Credit Carryforward to the combined total of such
carryforwards. The consolidated minimum tax credit allocated to each
company for the taxable year will equal the sum of the amounts
allocated in the two-step computation.
Where a consolidated tax is reduced by an alternative minimum tax
credit, the credit will be apportioned to the members having paid a
separate return alternative minimum tax in prior years, on a first-in;
first-out basis. The credit will be allocated based on the ratio of the
separate return alternative minimum tax to the aggregate of all members
having separate return alternative tax for each year from which the
credit was generated by reversal of prior years alternative minimum
taxes on a first-in; first-out basis.
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Step 6 - Reimbursement - Each Member of the Group shall pay its
apportioned share of the consolidated tax liability (including its
apportioned share of consolidated alternative minimum tax) along with
any additional amount determined under Step 2 to KSE no later than 90
days after the filing of the Federal consolidated tax return. KSE shall
thereafter distribute any amounts determined under Step 3 to the
appropriate Member of the Group. Within 30 days of each quarterly
payment date for estimated taxes, each Member of the Group shall pay to
the KSE an estimate of the amounts due under Steps 1 and 2 above. KSE
will thereafter distribute an estimate of the amounts due under Step 3
to appropriate Members of the Group. These amounts shall be paid within
a reasonable period after request by KSE. Any amounts so paid in any
year shall reduce the final amounts payable as set forth above, and any
balance due resulting from the reduction shall be promptly refunded.
B. Unused Corporate Tax Benefits: A Member of the Group that is entitled to
payment for a corporate tax benefit, but does not receive such payment
because of the rules in Step 3 shall retain such right for the future to
the extent that such benefit can be applied against the consolidated tax
liability. Uncompensated corporate tax benefits arising from negative
taxable income shall have priority over the benefits attributable to excess
tax credits.
Carryover and other rights, if any, accrued under past regulations and
orders for which a member corporation has not been paid will be
accounted for as follows: Each such member generating such benefits
shall receive payment in the earliest year in which statutory carryover
periods have not expired. Payment will be received, following the
execution of this Agreement, from the companies which benefited from
the prior deductions in the same ratios initially used to distribute
such benefits.
In the event the consolidated return reflects a net operating loss or
excess general business tax credits which cannot be totally carried
back, the tax benefit of such net operating loss or excess shall be
allowed as a carryover to future years. In the event they cannot be
fully utilized on a consolidated basis, a proportionate allocation
under this Section 3 will be made. If and when the tax benefits are
realizable on a consolidated basis in a subsequent year, such tax
benefits shall be allocated to members originally denied such benefits
in the year the items were generated.
C. No subsidiary company, as a result of the method of allocation described
herein, shall be required to pay more tax than its separate return tax as
defined in Section 2.
4. Tax Adjustments
In the event the consolidated tax is subsequently materially revised by
Internal Revenue Service adjustments, amended returns, claims for refund,
or in any event, a final determination, then such changes, together with
any interest related thereto, shall be allocated in the same manner
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as though these adjustments had been a part of the original consolidated
Federal income tax return that was filed.
In any situation in which the Group's tax liability is adjusted by a
revenue agent's report or a court settlement and an item-by-item
modification of the return is not made, the tax effects of such adjustments
shall be allocated in accordance with Section 3 of this Agreement or,
considering all the facts and circumstances, under such other method as may
be determined to be more fair and equitable.
Payments between KSE and the appropriate Members of the Group shall be made
within 120 days after such payments are made or refunds, or, in the case of
contested proceedings, within 120 days after a final determination of the
contest. Interest and penalties, if any, attributable to such an adjustment
shall be paid by each Member of the Group to KSE in proportion to the
increase in such Member's separate return tax liability computed under
Section 3 of this Agreement that is required to be paid to KSE. All other
penalties shall be allocated to KSE. KSE will be the sole arbiter for the
allocation of penalties under this Agreement.
5. Allocation Procedures for State Income Tax Liabilities
Any current state income tax liability or benefit associated with a State
income tax return or franchise tax return involving more than one Member
shall be allocated to such subsidiaries doing business in such state based
on their separate return liabilities and other principles set forth herein.
The consolidated, combined, or unitary state tax liability shall be
allocated to each company included in a consolidated, combined, or unitary
state income tax return in accordance with the procedures set forth in
Section 3, supra. Only companies with tax nexus in a particular state shall
be allocated a portion of such state's income tax liability.
No Member is to be allocated a state tax which is greater than its state
tax liability had it filed a separate return, including the
carryback/carryforward period. All available credits are to be allocated to
the member generating the credit prior to the allocation of the tax
liability if available on a separate return basis.
As set forth in Section 4, in the event the consolidated, combined or
unitary state income tax liability for any tax year is re-determined
subsequent to the allocation of the such tax liability reported for that
tax year, the re-determined tax liability shall be allocated pursuant to
this Agreement as if the adjustments and modifications related to this
determination had been a part of the original return.
Any interest or penalties associated with underpayment or overpayment of
state tax shall be allocated based on the allocation of the underlying
underpayment or overpayment of tax. All other penalties shall be allocated
to KSE. KSE will be the sole arbiter for the allocation of penalties under
this Agreement.
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6. Subsidiaries of Parent or Members
If at any time, Parent or any of the Members acquires or creates one or
more subsidiary corporations that are includible corporations of the Group,
they shall be subject to this Agreement and all references to the Members
herein shall be interpreted to include such subsidiaries as a group.
7. Successors
This Agreement shall be binding on and inure to the benefit of any
successor, by merger, acquisition of assets or otherwise, to any of the
parties hereto (including but not limited to any successor of KSE or any of
the Members succeeding to the tax attributes of such corporation under
Section 381 of the Code) to the same extent as if such successor had been
an original party to this Agreement.
8. Termination Clause
This Agreement shall apply to the taxable year ending December 31, 2000,
and all subsequent taxable years, unless all Members of the Group agree in
writing to terminate the Agreement prior to the end of the taxable year.
Notwithstanding any termination, this Agreement shall continue in effect
with respect to any payments or refunds due for all taxable years prior to
termination.
9. Effective Date
This Agreement shall apply to the consolidated federal and state income tax
returns to be filed for the calendar year ending December 31, 2000 and all
subsequent years, unless subsequently amended.
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EXHIBIT 1
The following members of the KeySpan Corporation affiliated group of
corporations as described in Section 1504 of the Internal Revenue Code hereby
authorize their common parent corporation, KeySpan Corporation to make and file
a consolidated federal income tax return on behalf of the group:
Federal Employer
Identification
Name and Address Number_______
--------------------------------------------------------------------------------
KeySpan Corporation............................................. 00-0000000
KeySpan Energy Corporation...................................... 00-0000000
ACJ Acquisition LLC............................................. 00-0000000
Active Conditioning Corp........................................ 00-0000000
The Brooklyn Union Gas Company.................................. 00-0000000
Delta KeySpan Inc............................................... 00-0000000
Fourth Avenue Enterprise Piping Corp............................ 00-0000000
Xxxxxx-KeySpan LLC.............................................. 00-0000000
GEI Development Corp............................................ 00-0000000
GEI Timna Inc................................................... 00-0000000
KeySpan Communications Corp..................................... 00-0000000
KeySpan Corporate Services LLC.................................. 00-0000000
KeySpan Cross Bay, LLC.......................................... 00-0000000
KeySpan Electric Services LLC................................... 00-0000000
KeySpan Energy Development Corporation.......................... 00-0000000
KeySpan Energy Management Inc................................... 00-0000000
KeySpan Energy Services Inc..................................... 00-0000000
KeySpan Energy Solutions, LLC................................... 00-0000000
KeySpan Energy Supply LLC....................................... 00-0000000
KeySpan Energy Trading Services LLC............................. 00-0000000
KeySpan Engineering Associates, Inc............................. 00-0000000
KeySpan Exploration and Production LLC.......................... 00-0000000
KeySpan Gas East Corporation.................................... 00-0000000
KeySpan Generation LLC.......................................... 00-0000000
KeySpan International Corporation............................... 00-0000000
KeySpan MHK, Inc................................................ 00-0000000
KeySpan Midstream LLC........................................... 00-0000000
KeySpan Northeast Ventures, Inc................................. 00-0000000
KeySpan Operating Services, LLC................................. 00-0000000
KeySpan Plumbing Solutions, Inc................................. 00-0000000
KeySpan Ravenswood, Inc......................................... 00-0000000
KeySpan Services, Inc........................................... 00-0000000
KeySpan Technologies, Inc....................................... 00-0000000
KeySpan Utility Services LLC.................................... 00-0000000
KeySpan-Ravenswood Services Corp................................ 00-0000000
Northeast Transmission Co., Inc................................. 00-0000000
Xxxxxx, Xxxxxxxxxx and Xxxxxx Inc............................... 00-0000000
X. X. Xxxxxxx LLC............................................... 00-0000000
Xxx-Xxx Inc..................................................... 00-0000000
Xxx-Xxx Electrical Inc.......................................... 00-0000000
Xxx-Xxx Mechanical Inc.......................................... 00-0000000
THEC Holdings Corp.............................................. 00-0000000
WDF, Inc........................................................ 00-0000000
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Eastern Enterprises............................................. 00-0000000
EE-AEM Company, Inc............................................. 00-0000000
AMR Data Corporation............................................ 00-0000000
Boston Gas Company.............................................. 00-0000000
Boston Gas Services, Inc........................................ 00-0000000
Broken Bridge Corporation....................................... 00-0000000
Capital Marine Supply, Inc...................................... 00-0000000
Chotin Transportation, Inc...................................... 00-0000000
Colonial Gas Company............................................ 00-0000000
Eastern Associated Capital Corp................................. 00-0000000
Eastern Associated Securities Corp.............................. 00-0000000
Eastern Associated Terminals Company............................ 00-0000000
Eastern Energy Systems Corp..................................... 00-0000000
Eastern Rivermoor Company, Inc.................................. 00-0000000
Eastern Urban Services, Inc..................................... 00-0000000
EE Acquisition Company, Inc..................................... 00-0000000
EnergyNorth Incorporated........................................ 00-0000000
EnergyNorth Natural Gas, Inc.................................... 00-0000000
EnergyNorth Propane, Inc........................................ 00-0000000
EnergyNorth Realty, Inc......................................... 00-0000000
EnergyNorth Resources, Inc...................................... 00-0000000
ENI Mechanicals, Inc............................................ 00-0000000
Essex Gas Company............................................... 00-0000000
Federal Barge Lines, Inc........................................ 00-0000000
Granite State Plumbing & Heating................................ 00-0000000
Xxxxxxx Marine Corp............................................. 00-0000000
LNG Storage, Inc................................................ 00-0000000
Massachusetts LNG, Inc.......................................... 00-0000000
Midland Enterprises, Inc........................................ 00-0000000
Minnesota Harbor Services....................................... 00-0000000
Mystic Steamship Corporation.................................... 00-0000000
Northern Energy Company, Inc.................................... 00-0000000
Northern Peabody Inc............................................ 00-0000000
Orgulf Transport Co............................................. 00-0000000
Orsouth Transport Co............................................ 00-0000000
PCC Land Company, Inc........................................... 00-0000000
Philadelphia Coke Company, Inc.................................. 00-0000000
Port Xxxxx Marine Service, Inc.................................. 00-0000000
Red Circle Transport Co......................................... 00-0000000
River Fleets, Inc............................................... 00-0000000
ServicEdge Partners, Inc........................................ 00-0000000
The Ohio River Company.......................................... 00-0000000
The Ohio River Company Traffic Division, Inc.................... 00-0000000
The Ohio River Terminals Company................................ 00-0000000
Transgas, Inc................................................... 00-0000000
Water Products Group Incorporated............................... 00-0000000
Western Associated Energy Corp.................................. 00-0000000
West Virginia Terminals Co...................................... 00-0000000
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EXHIBIT 2
Pursuant to the requirements of the Public Utility Holding Company Act of 1935,
the undersigned, duly authorized, have signed this Agreement on behalf of the
company(s) indicated.
/s/ Chief Financial Officer of Subsidiary Corporation
By:
-------------------------------------
DATE:
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