Summit Materials Tax Receivable Agreement

The Summit Materials Tax Receivable Agreement (TRA) is a complex agreement that can have a significant impact on a company`s financial status. The TRA is a tax-sharing agreement that is often used in mergers and acquisitions (M&A) transactions to efficiently allocate tax benefits and liabilities of the acquired company. In this article, we will discuss the basics of the Summit Materials TRA, its importance, and its impact on the company`s finances.

The Summit Materials TRA is a tax agreement that was created when Summit Materials, a construction materials company, went public in 2014. The agreement was established to allocate tax benefits and liabilities between Summit Materials and its former private equity owners, Blackstone and Silverhawk Capital Partners. The TRA allows Summit Materials to receive benefits from the tax assets generated by the company`s operations in the years before the public offering. The income tax benefits include the utilization of net operating losses, certain tax credits, and other tax assets.

The TRA is an essential component of the M&A transaction as it helps reduce the overall tax burden of the acquiring company. Additionally, it helps the acquired company transfer tax benefits to its new owners, helping to offset the cost of the acquisition. The TRA is also a way for the company to maximize its tax savings and minimize its tax liabilities.

The Summit Materials TRA is a relatively complicated agreement that requires a professional understanding of tax law and accounting. It is imperative to engage a competent tax professional to navigate the complexities of the TRA. The Agreement is often subject to negotiation, and the specific terms are dependent on the transactional context. The specific tax benefits included in a TRA vary from deal to deal and depend on a variety of factors, including the structure of the transaction, the tax laws in effect at the time of the deal, and the acquired company`s specific tax position.

In conclusion, the Summit Materials Tax Receivable Agreement is a crucial component of M&A transactions, providing ways for companies to offset their tax liabilities and maximize their tax savings. It is imperative to engage experienced tax professionals when negotiating and executing TRAs. The specifics of each TRA will be dependent on the transaction and require a detailed analysis of the acquired company`s tax position and the tax laws in effect at the time of the deal. The Summit Materials TRA provides an excellent case study for understanding the complexities of tax sharing agreements in M&A transactions.