A Tax Receivable Agreement (TRA) is a legal contract where a company agrees to share the economic benefits from certain tax savings with another party. These tax savings may relate to deductions for depreciation, goodwill amortization, and net operating losses.
The first TRAs originated in the early 1990s;[1] since then, TRAs have become increasingly prevalent. Prior to 2005, TRAs were used in less than 1% of initial public offerings (“IPOs”), but as of 2018, that number had increased to 8% of IPOs.[2] This growth has created an ecosystem of leading accounting and law firms with specialized expertise in TRAs.[3]
TRAs are now a common feature of IPOs structured as an Up-C.[4] Up-C IPOs are designed to generate basis step-ups that allow a company to benefit from substantial tax deductions.[5] TRAs are typically drafted to require that the newly public company share 85% of the tax benefits it receives from these basis step-ups with its pre-IPO owners.
TRAs often allow holders to transfer their rights under the TRA to outside investors, resulting in a growing market for secondary TRA investments.[6] In the past, TRA holders may not have been able to easily monetize their TRA asset due to a lack of liquidity providers. However, a number of investment firms, like Parallaxes Capital,[7] have since emerged to provide liquidity to TRA holders.
^Elliott, Amy S. (July 25, 2011). "IPO Agreements That Shift Basis Step-Up to Sellers Proliferate". Tax Notes: 334.
^Shobe, Gladriel (April 2018). "Private Benefits in Public Offerings: Tax Receivable Agreements in IPOs". Vanderbilt Law Review. 71: 2–5.
^"TRA League Tables - Parallaxes Capital". 2023-03-28. Retrieved 2023-11-14.
^"Considering an IPO? Here's why an Up-C might be Advantageous". www.pwc.com. Retrieved 20 July 2022.
^Coombs, Luke (July 2016). "The Rise of the Up-C and TRA in IPOs". Andersen. Retrieved 2022-05-24.
^"Investing in Tax Receivable Agreements". www.ropesgray.com. Retrieved 20 July 2022.
^"A New, Esoteric Royalty Market Is Poised to Take Off". Institutional Investor. 2023-02-15. Retrieved 2023-11-13.
and 29 Related for: Tax Receivable Agreement information
A TaxReceivableAgreement (TRA) is a legal contract where a company agrees to share the economic benefits from certain tax savings with another party...
financial derivatives, cryptocurrencies, non-fungible tokens, and TaxReceivableAgreements. Investments in real estate, forestry and shipping are also often...
firms, accounts receivable from Colombian debtors, some portfolio assets, and financial lease agreements are all exempt from the tax. Following the COVID-19...
A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities...
cheaper bank loans, etc. Benefits for pre-IPO owners in the form of TaxReceivableAgreements There are several disadvantages to completing an initial public...
swaps, collateralized debt obligations, credit default swaps, and TaxReceivableAgreements Leveraged investing, which is the investment of borrowed money...
1979 Tarama Airport, Okinawa Prefecture, Japan (IATA code: TRA) TaxReceivableAgreements, a type of legal contract Theory of reasoned action, a model of...
Accounts Receivable, Fixed Assets along with some basic taxes. An indirect tax (such as sales tax, value added tax (VAT), or goods and services tax (GST))...
costs should be subject to the agreement. This may be specified under the agreement, but is also subject to adjustment by tax authorities. In determining...
can levy upon wages, bank accounts, social security payments, accounts receivables, insurance proceeds, real property, and, in some cases, a personal residence...
income tax, is a closely held corporation (or, in some cases, a limited liability company (LLC) or a partnership) that makes a valid election to be taxed under...
account receivable. If there is tax on the sale, e.g. VAT or GST, then the buyer and seller may need to adjust their tax accounts in accordance with tax legislation...
profit AOP – Annual operating plan AP – Accounts payable AR – Accounts receivable ARPU – Average revenue per user ASP – Average selling price agcy. – Agency...
real estate), depreciable property used in a business, accounts or notes receivable, certain commodities derivatives and hedging items, and certain copyrights...
a deposit, such as the collection by the bank of the depositor's note receivable. A credit note lists the products, quantities, and agreed prices for products...
conduit. These assets can include things like auto loans, credit card receivables, residential or commercial mortgage loans, mortgage-backed securities...
situated, Plaintiffs v Stephen E. Heretick, 321 Henderson Receivables, LLC, JG Wentworth Receivables, LLC, Seneca One Finance, Inc., Structured Settlement...
unrealized receivables or inventory items. The most common example of unrealized receivables contributed to a partnership are accounts receivable. This is...
remittance of withholding taxes; and implementation of Compromise Settlement Program for taxpayers with outstanding accounts receivable and disputed assessments...
resulting percentage is useless. For example, the court in In Re Henderson Receivables Origination v. Campos noted an annual discount rate of 16.8% where the...
case of default of the underlying (a loan, bond or other receivable), delivers this receivable to the protection seller and receives from the seller the...
beneficiary makes contributions to a retirement fund during his service and the receivable pension is based on the balance in his pension fund at the time of his...
capabilities like general ledger, accounts payable, accounts receivable, cash management, tax management, purchasing and inventory and order management,...
approved, processed, and paid. The main responsibility of the accounts receivable department is to ensure all invoices are created, delivered and subsequently...
credit card debt obligations (or other non-debt assets which generate receivables) and selling their related cash flows to third party investors as securities...
Nonmortgage assets, such as credit card receivables, leases, and auto loans are ineligible investments. The Tax Reform Act made it easier for savings institutions...
made including TVA, for tax, and RVA, for replacement of the derivative on downgrade. FVA may be decomposed into FCA for receivables and FBA for payables...
instruments defy categorization into the above matrix, for example repurchase agreements. The gain or loss on a financial instrument is as follows: Off-balance-sheet...
Global Information