MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
General
This section summarizes certain
material U.S. federal income tax consequences to our Company and to beneficial owners of our Class A common stock
.
This summary discusses only the tax consequences to beneficial owners of our Class A common stock who hold such
common stock as a capital asset within the meaning of Section 1221 of the Code
.
Because this section is a general summary, it does not address all aspects of taxation that may be relevant to particular beneficial owners in light of their
personal investment or tax circumstances, or to certain types of beneficial owners that are subject to special treatment under the U.S. federal income tax laws, including, but not limited to, insurance companies,
tax-exempt
organizations (except to the limited extent discussed in Taxation of
Tax-Exempt
Shareholders), partnerships, financial institutions or
broker-dealers, and
non-U.S.
individuals and foreign corporations (except to the limited extent discussed in Taxation of
Non-U.S.
Shareholders).
The statements in this section are based on the current U.S. federal income tax laws
.
We cannot assure you that new laws,
interpretations of law or court decisions, any of which may take effect retroactively, will not result in U.S. federal income tax consequences different from those discussed below
.
No assurance can be given that the Internal Revenue Service,
or the IRS, would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below
.
We have not sought and will not seek an advance ruling from the IRS regarding any matter in this prospectus
supplement
.
This discussion does not address any aspect of U.S. federal gift or estate tax, or state, local or
non-U.S.
tax laws.
This section is not a substitute for careful tax planning. Prospective investors are urged to consult their own tax advisors regarding the
specific U.S. federal, state, foreign and other tax consequences to them, in light of their own particular circumstances, of the purchase, ownership and disposition of our Class A common stock and the effect of potential changes in applicable
tax laws.
Taxation of Our Company
We are treated as a taxable C corporation under the Code. As such, we are subject to corporate income tax on our taxable income and gains that
are not offset by our NOL and NCL carry-forwards. Beneficial owners of Class A common stock are not taxable on our income and losses from our operations, but are taxable on distributions received from us to the extent described below.
As of June 30, 2018, we had $40 million of NOL carry-forwards and $393 million of NCL carry-forwards available to offset future
income and gain. Our NOL carry-forwards will begin to expire in 2027. The scheduled expirations of our NCL carry-forwards are $137 million in 2019, $103 million in 2020 and $70 million in 2021, $4 million in 2022 and
$79 million in 2023.
On December 22, 2017, the President signed the Tax Cuts and Jobs Act, which provides for substantial
changes to the federal taxation of individuals and corporations with an effective date of January 1, 2018. For corporate taxpayers, the federal income tax rate was lowered from 35.0% to 21.0%. Through December 31, 2017, the Company was
subject to federal alternative minimum tax (AMT) on its taxable income and gains that are not offset by its NOL and NCL carryforwards with any AMT credit carryforwards available to offset future regular tax liabilities. As part of the
Tax Cuts and Jobs Act, the corporate AMT is repealed for tax years beginning after December 31, 2017 with any AMT credit carryforward after that date continuing to be available to offset a taxpayers future regular tax liability. In
addition, for tax years beginning in 2018, 2019 and 2020, to the extent that AMT credit carryforwards exceed the regular tax liability, 50% of the excess AMT credit carryforwards would be refundable in that year with any remaining AMT credit
carryforwards fully refundable in 2021. As of June 30, 2018 the Company had AMT credit carryforwards of $9 million.
Our ability
to use our NOL and NCL carry-forwards and
built-in
losses to offset future taxable income would be severely limited if we experienced an ownership change under Sections 382 and 383 of the Code. We
adopted the Rights Plan on June 1, 2009 in an effort to protect against the occurrence of an ownership change. The Rights Plan was ratified by our shareholders in June 2010 and its extension was ratified by our shareholders in June
2018. The Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding Class A common stock (an Acquiring Person) without the approval of our Board of Directors. Our Rights Plan, however, does
not protect against all transactions that could cause an ownership change, such as public issuances and repurchases of shares of our Class A common stock or transactions in our Class B common stock. Accordingly, we may experience an
ownership change that would severely limit our ability to use our NOL and NCL carry-forwards.
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