TAX SHARING AGREEMENT
THIS AGREEMENT is entered into by and between ING Life Insurance and Annuity
Company (formerly known as Aetna Life Insurance and Annuity Company) ("ILIAC")
and ING Insurance Company of America, Inc. (formerly known as Aetna Insurance
Company of America, Inc.) ("Subsidiary").
WITNESSETH:
WHEREAS, ILIAC and the Subsidiary are members of an affiliated group, as that
term is defined in Section 1504 of the Internal Revenue Code of 1986, as amended
(the "Code"), which expects to file a consolidated federal income tax return for
each taxable year during which the Subsidiary are includible corporations
qualified to so file; and
WHEREAS, it is desirable for the Subsidiary and ILIAC to enter into this Tax
Sharing Agreement ("Agreement") to provide for the manner of computation of the
amounts and timing of payments with regard thereto by ILIAC to the Subsidiary
and by the Subsidiary to ILIAC, and various related matters;
NOW, THEREFORE, in consideration of the agreements contained herein and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. AMOUNT OF PAYMENTS
a. GENERAL - For each taxable year during which the Subsidiary is
included in a consolidated federal income tax return with ILIAC,
the Subsidiary will pay to ILIAC an amount equal to the regular
federal income tax liability (including any interest, penalties
and other additions to tax) that the Subsidiary would pay on its
taxable income if it were filing a separate, unconsolidated
return, provided that (i) Tax Assets (as defined herein) will be
treated in accordance with subsection (b) of this section, (ii)
intercompany transactions will be treated in accordance with
income tax regulations governing intercompany transactions in
consolidated returns and subject to any election which may be
made by ILIAC with regard thereto; (iii) the Subsidiary's payment
will be increased to the extent that such Subsidiary generates
Other Taxes, as determined in accordance with subsection (d) of
this section; (iv) such computation will be made as though the
highest rate of tax specified in subsection (b) of Section 11 of
the Code were the only rate set forth in that subsection, and (v)
such computation shall reflect the positions, elections and
accounting methods used by ILIAC in preparing the consolidated
federal income tax return for ILIAC and its Subsidiary.
b. TAX ASSETS - "Tax Asset" shall mean any net operating loss, net
capital loss, investment tax credit, foreign tax credit,
charitable deduction, dividends received deduction or any other
deduction, credit or tax attribute which could reduce taxes.
Except as provided in subsection (c) of this section, for each
taxable year during
which a Subsidiary is included in a consolidated federal income
tax return with ILIAC, ILIAC will pay to the Subsidiary an amount
equal to the tax benefit of the Subsidiary's Tax Assets generated
in such year. The valuation of the tax benefit attributable to a
Subsidiary's Tax Assets shall be made by ILIAC, and shall be
determined without regard to whether such Tax Assets are actually
utilized in the reduction of the consolidated federal income tax
liability for any consolidated taxable year.
c. SEPARATE RETURN YEARS - To the extent any portion of a Tax Asset
of the affiliated group is carried back to a pre-consolidation
separate return year of the Subsidiary (whether by operation of
law or at the discretion of ILIAC) the Subsidiary shall not be
entitled to payment from ILIAC with respect thereto. This shall
be the case whether or not that Subsidiary actually receives
payment for the benefit of such Tax Asset from the Internal
Revenue Service ("IRS") or from the parent of a former affiliated
group.
d. OTHER TAXES - For any taxable year in which the affiliated group
incurs taxes (other than the alternative minimum tax) such as ITC
recapture, environmental tax, etc. ("Other Taxes"), such taxes,
to the extent directly allocable to particular members of the
affiliated group, will be paid by such members. To the extent
such taxes are not directly allocable to particular members of
the affiliated group, such taxes will be paid by ILIAC and/or the
Subsidiary producing the attributes that give rise to such taxes,
in the proportion that such attributes bear to the total amount
of such attributes.
e. ALTERNATIVE MINIMUM TAX ("AMT") AND RELATED MINIMUM TAX CREDIT
("MTC")- For any taxable year in which the affiliated group
incurs an AMT or utilizes a MTC, the Subsidiary producing the
attributes that give rise to the AMT or MTC shall pay to, or
receive from, ILIAC such AMT or MTC amount respectively. The
calculation of the AMT or MTC shall be subject to a methodology
determined by ILIAC in its sole discretion, provided, however,
that any method adopted by ILIAC shall not be changed without
prior notification to all affected Subsidiary. Any payments
required under this subsection are in addition to payments
required under the previous subsections.
f. Unless specifically approved in writing, all payments made
pursuant to this Agreement by the Subsidiary shall be made by the
Subsidiary, and not by any other company or business unit on
behalf of the Subsidiary.
2. INSTALLMENT PAYMENTS
a. DETERMINATION AND TIMING - During and following a taxable year in
which the Subsidiary is included in a consolidated federal income
tax return with ILIAC, it shall pay to ILIAC, or receive from
ILIAC, as the case may be, installment payments of the amount
determined pursuant to section 1 of this Agreement. Payments
shall take place on the dates, on the bases of calculations, and
in amounts that produce cumulative installments, as follows:
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DATE BASIS OF CALCULATION CUMULATIVE INSTALLMENT
---- -------------------- ----------------------
April 15 Prior year annual financial statement 25% of tax liability as determined in prior
year financial statements results updated for
known adjustments
June 15 March 31 three month financial statement 50% of tax liability as determined by current
financial statement annualized results
September 15 June 30 six month financial statement 75% of tax liability as determined by current
financial statement annualized results
December 15 September 30 nine month financial 100% of tax liability as determined by
statement current financial statement annualized results
March 15 Year-end annual financial statement 100% of tax liability as determined by actual
financial statements results for prior year
updated for known adjustments
Not earlier than September Final tax return 100% of tax liability for prior year
15 of the following year
The due dates, basis of calculation and cumulative installments
set forth above and made during a taxable year are intended to
correspond to the applicable percentages as set forth in Section
6655(e)(2)(B)(ii) of the Code. Should the Code be amended to
alter such provisions, it is hereby agreed by the parties to this
Agreement that the provisions will correspondingly change. ILIAC
may revise the schedule of installment payments set forth in this
paragraph, and may provide for annual rather than quarterly
payments in cases where amounts due fall below a certain
threshold, although any such change shall be prospective and
shall not take effect prior to written notice to the Subsidiary.
b. ESTIMATED TAXES AND OTHER AMOUNTS - ILIAC shall pay required
installments of federal estimated taxes pursuant to Code section
6655, and such other amounts with respect to taxes shown on the
consolidated return for the taxable year pursuant to any other
applicable provision of the Code ("tax payment"), to the IRS on
behalf of itself and the Subsidiary. ILIAC shall have the sole
right to determine the amount of each such tax payment with
respect to the affiliated group's tax liability for the taxable
year.
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c. ADDITIONAL PAYMENTS BY SUBSIDIARY - Should the amount of any tax
payment made by ILIAC under this section exceed the sum of
installment payments made by it and the Subsidiary for any
corresponding installment date pursuant to section 2 of this
Agreement, ILIAC may, in its sole discretion, determine the
Subsidiary's fair and reasonable share of that excess, and notify
the Subsidiary thereof and such amount shall be paid over to
ILIAC within 15 business days of the date of notification by
ILIAC. Should ILIAC make any tax payment to the IRS on a date
that does not correspond to the installment dates pursuant to
section 2, the Subsidiary will pay over to ILIAC an amount which
ILIAC may in its sole discretion, determine to be due from the
Subsidiary.
d. PENALTY IN ADDITION TO TAX - If a penalty or an addition to tax
for underpayment of estimated taxes is imposed on the affiliated
group with respect to any required installment under section 6655
of the Code, ILIAC shall, in its sole discretion, determine the
amount of the Subsidiary's share of such penalty or addition to
tax, which amount shall be paid over to ILIAC within 15 business
days of the date of notification by ILIAC.
3. ADJUSTED RETURNS - If any adjustments are made to the income, gains,
losses, deductions or credits of the affiliated group for a taxable
year during which the Subsidiary is a member, whether by reason of the
filing of an amended return, or a claim for refund with respect to such
taxable year, or an audit with respect to such taxable year by the IRS,
the amounts due under this Agreement for such taxable year shall be
redetermined by taking into account such adjustments. If, as a result
of such redetermination, any amounts due under this Agreement shall
differ from the amounts previously paid, then, except as provided in
section 6 hereof, payment of such difference shall be made by the
Subsidiary to ILIAC or by ILIAC to the Subsidiary, as the case may be,
(a) in the case of an adjustment resulting in a refund or credit, not
later than thirty (30) days after the date on which such refund is
received or credit is allowed with respect to such adjustment or (b) in
the case of an adjustment resulting in the assertion of a deficiency,
not later than thirty (30) days after the Subsidiary is notified of the
deficiency. Any amounts due to or from a Subsidiary under this section
shall be determined with respect to such refund or deficiency and any
penalties, interest or other additions to tax which may be imposed.
ILIAC shall indemnify the Subsidiary in the event the Internal Revenue
Service levies upon such Subsidiary's assets for unpaid taxes in excess
of the amount required to be paid by such Subsidiary in relation to a
consolidated federal income tax return filed pursuant to this
Agreement.
4. PROCEDURAL MATTERS - ILIAC shall prepare and file the consolidated
federal income tax return and any other returns, documents or
statements required to be filed with the IRS with respect to the
determination of the federal income tax liability of the affiliated
group. In its sole discretion, ILIAC shall have the right with respect
to any consolidated federal income tax returns which it has filed or
will file, (a) to determine (i) the manner in which such returns,
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, (ii) whether any extensions may
be requested and (iii) the elections that will be made by the
Subsidiary, (b) to contest, compromise or settle
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any adjustment or deficiency proposed, asserted or assessed as a result
of any audit of such returns by the IRS, (c) to file, prosecute,
compromise or settle any claim for refund and (d) to determine whether
any refunds to which the affiliated group may be entitled shall be paid
by way of refund or credited against the tax liability of the
affiliated group. The Subsidiary hereby irrevocably appoints ILIAC as
its agent and attorney-in-fact to take such action (including the
execution of documents) as ILIAC may deem appropriate to effect the
foregoing.
5. ADDITIONAL MEMBERS - If future subsidiaries are acquired or created and
they participate in the consolidated federal income tax filing, such
subsidiary shall join in and be bound by this Agreement. This section
will also apply to subsidiaries that are not eligible immediately to
join the affiliated group, when they become eligible to join the
affiliated group.
6. COMPANIES LEAVING ILIAC GROUP - Except as specifically treated to the
contrary herein, the Subsidiary shall be treated as having withdrawn
from this Agreement when the Subsidiary ceases to be a member of the
affiliated group, or upon signing a letter of intent or a definitive
agreement to sell the Subsidiary. Notwithstanding any provision to the
contrary in section 2 hereof, amounts payable to or receivable from
ILIAC shall be recomputed with respect to the Subsidiary, including an
estimate of the remaining taxes actually payable or receivable upon the
filing of the consolidated tax return for the year of withdrawal, as of
the last day the Subsidiary is a member of the affiliated group. Any
amounts so computed as due to or from ILIAC to or from the Subsidiary
shall be paid prior to its leaving the group, provided, however, that
any deficiency or excess of taxes determined on the basis of the tax
return filed for the year of withdrawal, and paid to or from ILIAC
related to the tax liability of the Subsidiary for the portion of the
year of withdrawal during which it had been a member of the affiliated
group, shall be settled not later than November 15 of the year
following the year of the date of withdrawal, in accordance with
section 2 of this Agreement.
The extent to which ILIAC or the Subsidiary is entitled to any other
payments as a result of adjustments, as provided in section 3 hereof,
determined after the Subsidiary has left the affiliated group but
affecting any taxable year during which this Agreement was in effect
with respect to ILIAC and the Subsidiary, shall be provided for
pursuant to a separate written agreement between ILIAC and the
Subsidiary, or its new owner, or in the absence of such agreement,
pursuant to the provision of section 3 hereof. Tax benefits arising
from the Tax Assets of the Subsidiary carried back to tax years during
which the Subsidiary was a member of the affiliated group shall not be
refunded to the Subsidiary, unless specifically provided for pursuant
to a separate written agreement between ILIAC and the Subsidiary, or
its new owner.
In the case of any Tax Asset of a Subsidiary (i) that arose in a
consolidated taxable year during which it was a member of the
affiliated group, (ii) for which the Subsidiary was paid by ILIAC
pursuant to Section 1(b) of this Agreement, and (iii) which has not
been utilized in the reduction of the consolidated federal income tax
liability of the affiliated group for any consolidated taxable period
ending on or before the date that the Subsidiary
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leaves the group, the Subsidiary shall repay to ILIAC prior to the time
it leaves the group the amount of the tax benefit previously received
with respect to the Tax Asset.
7. BOOKS AND RECORDS - The books, accounts and records of ILIAC and the
Subsidiary shall be maintained so as to provide clearly and accurately
the information required for the operation of this Agreement.
Notwithstanding termination of this Agreement, all materials including,
but not limited to, returns, supporting schedules, workpapers,
correspondence and other documents relating to the consolidated federal
income tax return shall be made available to ILIAC and/or the
Subsidiary during regular business hours. Records will be retained by
ILIAC and by the Subsidiary, in a manner satisfactory to ILIAC,
adequate to comply with any audit request by the IRS or appropriate
State taxing authority, and, in any event to comply with any record
retention agreement entered into by ILIAC or the Subsidiary with such
taxing authority.
8. EARNINGS AND PROFITS - The earnings and profits of ILIAC and the
Subsidiary shall be determined during the period in which they are
members of the affiliated group filing a consolidated tax return by
allocating the consolidated tax liability in accordance with Income Tax
Regulations Sections 1.1552-1(a)(2) and 1.1502-33(d)(3).
9. ESCROW AGREEMENTS - The parties hereto agree that, to the extent
required by applicable law, they shall enter into and file with
appropriate jurisdictions any escrow agreements or similar contractual
arrangements with respect to the taxes covered by this Agreement. The
terms of such agreements shall, to the extent set forth therein, and
with respect to the parties thereto, prevail over the terms of this
Agreement.
10. TERMINATION - This Agreement shall be terminated if ILIAC and the
Subsidiary agree in writing to such termination or if the affiliated
group fails to file a consolidated federal income tax return for any
taxable year.
11. ADMINISTRATION - This Agreement shall be administered by the Vice
President of Taxes of ILIAC or, in his/her absence, by any other
officer of ILIAC so designated by the Controller of ILIAC. Disputes
between ILIAC and the Subsidiary shall be resolved by the Vice
President of Taxes of ILIAC or other designated officer and the senior
financial officer of each Subsidiary involved in the dispute.
12. PERIOD COVERED - This Agreement shall be effective with respect to each
party thereto upon signing by such party, and shall supersede all
previous agreements between ILIAC and the Subsidiary with respect to
the matters contained herein and such previous agreement shall
thereupon terminate. The Agreement shall apply to the taxable year
2001, to all prior taxable years which are open to adjustments as
provided in section 3 hereof (to the extent not subject to any separate
tax sharing agreement) and to all subsequent periods unless and until
amended or terminated, as provided in section 10 hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Tax Sharing Agreement.
ING Life Insurance and Annuity Company By /s/ Xxxxx Culdray-Xxxxxxx
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Title: Secretary
ING Insurance Company of America, Inc. By /s/ Xxxxx Culdray-Xxxxxxx
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Title: Secretary
