Con Ed Reversal Ends LILO/SILO Saga ' And Then Some

In January, the U.S. Court of Appeals for the Federal Circuit handed down its decision in Consolidated Edison Company of New York, Inc. v. United States, No. 2012-5040 (Fed. Cir. 2013), rev'g 90 Fed. Cl. 228 (2009). See LJN's Equipment Leasing Newsletter Sept. 2008, Oct. 2008 and Jan. 2010. The decision reverses the only lower court case that had decided a LILO or SILO transaction in favor of the taxpayer, and likely ends the decade-long litigation of these contentious leveraged lease cases. While the reversal was not unexpected in light of recent appellate cases disallowing LILO/SILO tax benefits, the decision has had the, perhaps, unintended effect of calling into question the use of lessee fixed-price purchase options in sale-leasebacks and other more conventional equipment leasing transactions.

In a typical LILO, the taxpayer, acting through a grantor trust, leases assets from a tax-exempt entity (e.g., a domestic municipal transit agency or a foreign entity not subject to U.S. income taxation) under a primary or ”head” lease. A SILO transaction is similar, except that the head lease term is deliberately structured to extend beyond the remaining useful life of the asset, so that it is treated as a sale for tax purposes. At closing, the taxpayer will make a significant payment to the lessee, either the purchase price for the property (in a SILO) or a partial prepayment of its head lease. The taxpayer then leases the property back to the tax-exempt entity under a net lease, where the lessee retains substantially all rights and responsibilities to use and maintain the property during the lease term.

At the end of the lease, the lessee may exercise an option to acquire the taxpayer/lessor's interest in the property. The exercise price is a fixed amount determined at the inception of the transaction based on an appraisal. The price is equal to or greater than the property's projected fair market value at the lease expiration date. If the lessee does not exercise its option, what happens next varies from LILO to SILO. With a LILO, the taxpayer/lessor typically may compel the lessee to renew the sublease for an additional period (for rent set at 90% to 95% of the projected rental value). In a SILO, different options apply if the lessee elects not to exercise the purchase option. The lessee must locate a third-party operator for the property and obtain nonrecourse refinancing of the lessor's outstanding debt. Payments under the third-party service contract must be sufficient to repay the nonrecourse financing. The principal tax benefits claimed by the taxpayer are deductions for head lease rent (in a LILO) or for depreciation (in a SILO) and interest on the nonrecourse debt.

Controversial Financing and Security Arrangements

The financing and security arrangements for LILOs and SILOs are particularly controversial. The controversy arises from the “economic defeasance” of the lessee's obligations and the resulting circular pattern of the movement of borrowed funds and of rental and purchase option payments. At the closing of the typical transaction, nearly all of the proceeds of the sale of the property (or the head lease prepayment in the case of a LILO) are deposited by the lessee in deposit accounts and/or used to purchase payment undertaking agreements from affiliates of the lenders. These deposit accounts and similar arrangements are designed to generate revenues that match in timing and amount the lessee's on-going rent payment obligations and the fixed-price purchase option if the lessee elects to exercise it. The deposits are also pledged to the lessor as collateral security for the lessee's lease payment obligations. The remainder of the closing date proceeds that are not set aside in the defeasance accounts is retained by the lessee (usually around 5% to 10% of the proceeds and referred to by the IRS as the lessee's “accommodation fee”).

Taxpayers have been unsuccessful defending LILO/SILO transactions. Most courts have viewed the lessee's purchase option as reasonably certain to be exercised and paid from the defeasance accounts. Under this application of the “substance over form” doctrine, the taxpayer never acquired tax ownership of the property (or head lease interest in a LILO) because it was likely to be repurchased by the lessee. Because it was almost certain that the lessee would exercise its purchase option, the taxpayer's potential for upside appreciation in asset value was capped by the option and its downside residual value risk was minimized, depriving the lessor of the benefits and burdens of ownership. Exercise was almost certain because the defeasance accounts provided a ready source of funds, making the exercise “free” to the lessee (a misleading idea because the money in those accounts belonged to and would be required to be returned to the lessee if it did not exercise the purchase option). Exercise was also highly likely because the alternatives to the purchase option were too onerous, disruptive to the lessee's operations and more economically burdensome (costly) when compared with the purchase option. Exercise was also expected because the property was essential to the lessee's business operations, which were frequently assets that provided key services to the public ' like public transportation, water and electricity. See BB&T Corp. v. United States, 523 F.3d 461, 469 (4th Cir. 2008), AWG Leasing Trust v. United States, 592 F. Supp. 2d 953 (2008), Altria Group Inc. v. United States, 658 F.3d 276 (2d Cir. 2011), Wells Fargo & Co. v. United States, 641 F.3d 1319 (Fed. Cir. 2011). See LJN's Equipment Leasing Newsletter, March 2010 and July 2011.

A Sympathetic View

Until its reversal on appeal, Consolidated Edison was the only LILO/SILO case decided in favor of the taxpayer. The lower court took a much more sympathetic view of the evidence presented by the taxpayer as to the likelihood of exercise of the purchase option. Unlike in BB&T and AWG, the court did not consider the exercise of the purchase option a “virtual certainty.” In contrast to the open skepticism exhibited by other courts, the judge in Con Ed seemed favorably impressed with the thoroughness of the appraisal and other expert reports provided as proof that alternatives to the purchase option were viable and that the purchase option was not certain to be exercised. Taking the transaction as a whole, the effect of the defeasance accounts was to reduce credit risk. It did not release the lessee from the legal obligation to pay rent and did not render the nonrecourse debt illusory. Because exercise of the purchase option was not certain, the court believed the taxpayer's investment in the residual value of the lease remained subject to market risk and should be respected.

Moreover, although the decision did not ultimately turn on economic substance/business purpose grounds, the lower court found that the taxpayer had credibly demonstrated substantial business reasons for engaging in the transaction. Con Edison is a utility, its lessee was a Dutch utility and the property in question was an electric generation plant located in the Netherlands, so the asset had logical connections to Con Edison's own operating business (in distinction to most of the other LILO/SILO investors ' banks with no direct experience operating the kinds of assets leased). However, the strong business-purpose case was not enough to uphold the taxpayer victory on appeal.

On Appeal

The Con Ed decision was reversed on appeal on the grounds that it applied the wrong standard in evaluating whether the lessee's purchase option should be deemed exercised. The lower court had found for the taxpayer because (among other reasons) the taxpayer had demonstrated that the lessee's exercise of the purchase option was not a “virtual certainty.” Two years after the Con Ed lower court rendered its decision, the Circuit Court for the Federal Circuit handed down its opinion affirming the government's position in Wells Fargo. According to the Con Ed appeals court, its decision in Wells Fargo requires that the lessor not have a “reasonable expectation” that the lessee will exercise its purchase option. The appellate court then applied this correct standard to the lower court record and concluded that while exercise may not have been a virtual certainty, the evidence clearly supported the conclusion that Con Ed reasonably expected the lessee to exercise its purchase option. The Circuit Court explained as follows:

The Claims Court applied the wrong standard ' understandably because, at the time that it rendered its decision, the Claims Court here did not have the benefit of our Wells Fargo decision. ' While the district court found that the options at issue in Wells Fargo were virtually certain to be exercised and we held on appeal that this finding was not clearly erroneous, we made clear that the relevant standard was reasonable likelihood. In evaluating whether the LILO Transaction in this case must be recharacterized, Wells Fargo requires that we assess whether a prudent investor in ConEd's position would have reasonably expected that [the lessee] would exercise the purchase option. As we stated in Wells Fargo:

“We have never held that the likelihood of a particular outcome in a business transaction must be absolutely certain before determining whether the transaction constitutes an abuse of the tax system. The appropriate inquiry is whether a prudent investor in the taxpayer's position would have reasonably expected that outcome. Characterization of a tax transaction based on a highly probable outcome may be appropriate, particularly where the structure of the transaction is designed to strongly discourage alternative outcomes.”

641 F.3d at 1325-26 (emphasis added). This language makes clear that a “reasonable expectation” standard, rather than a “certainty” standard, governs the recharacterization of transactions under the substance-over-form doctrine.

Note that in the very same paragraph of the quoted language from Wells Fargo the court enunciated yet a third standard ' “highly probable.” It raises the question whether the Wells Fargo court really meant to be as definitive about “reasonable expectation” as the Con Ed court concludes. Since it is the same court, it is fair to conclude that they really did mean it.

The Real Legacy

The reversal of the decision in Con Ed is not controversial in the context of LILO/SILO transactions. After all, these transactions had fixed-price purchase options and defeasance accounts, funded at closing with 90%-95% of sale proceeds, that ballooned to the fixed option price, and that were pledged as collateral to secure the lessee's payment obligations (including the purchase option price). The assets that were the subject of these leveraged sale-leasebacks were in most cases essential to the lessee's business operations, in many cases assets used in providing a public service. The ease with which the lessee could simply apply the defeasance proceeds to re-acquire the property made exercise attractive, even if the fixed price marginally exceeded the costs and burdens the lessee would endure should it not exercise the purchase option. It is not a long jump from “virtual certainty” to “reasonable expectation” in the context of LILO/SILO transactions.

The real legacy of this particular opinion will be the scope of its application in simpler cases where it may be more difficult to evaluate the likelihood that the lessee will exercise a purchase option. Because the case involves a LILO/SILO transaction, the temptation is to assume that the case is “limited to its facts” and its principles not applicable outside the context of LILO/SILO or similarly complicated, tax-informed' leasing transactions. Because it is a LILO transaction, the Con Ed case is a relatively easy one to decide under the court's “reasonable expectation” standard. But what of other transactions that do not possess the features that create the fatal “ownership loop” in a LILO/SILO? Transactions with purchase options set at fair market value (rather than a fixed amount based on expected fair market value)? Transactions with no defeasance or with considerably less defeasance than LILO/SILO transactions?

Given the scope of the language used in the opinion (“a 'reasonable expectation' standard, rather than a 'certainty' standard, governs the recharacterization of transactions under the substance-over-form doctrine”), and the lack of any language limiting its application, will the IRS or a court require the lessor in any lease with a purchase option to demonstrate that it lacked a reasonable expectation that the lessee would exercise the option? If a lease has a lessee purchase option at fair market value, does this end the inquiry? If the lease has a fixed price purchase option but with little or no defeasance, does this preclude a reasonable likelihood of exercise? Can other, non-economic factors, create a reasonable expectation in the mind of a lessor that a lessee will exercise a purchase option? If so, how should a lessor go about creating a record that demonstrates that it was unaware of any such factors?

The Con Ed case provides some guidelines, at least in the LILO/SILO context. The court pointed to the following factors as indicating that the taxpayer failed to meet its burden of proving that the lessee's exercise of the purchase option is not reasonably likely. First, a record of a contemporaneous statement made by a Con Ed financial officer in response to a question from the taxpayer's accountant to the effect that the lessee's exercise was reasonably assured because the lessee had done its economic analysis on the assumption that the property would be repurchased. Second, the taxpayer's own internal financial projections did not fully evaluate the alternatives to the purchase option. Third, the appraisal obtained by the taxpayer (inexplicably) failed to mathematically demonstrate that the fixed purchase option price exceeded the costs that the lessee would incur if it elected an alternative end-of-term option, and hence that exercise of the purchase option was not economically compelled. Finally, non-economic factors, such as the asset being an essential operating asset and the lessee's financial accounting treatment, are considered along with the economic analysis.

One tax commentator has remarked about the Con Ed decision: “the result is what I would have expected to see in a sane world where a transaction is entered into predominantly for the tax benefits and would not have been entered into if those tax benefits did not exist.” Since he has described most leveraged and single-investor equipment leases, he apparently does not believe equipment leasing has a place in a “sane world.” Those familiar with the industry know he may be right.

Conclusion

I believe that pricing of end-of-term purchase options at then-current fair market value should go a long way toward meeting the no “reasonable expectation” standard. Unless the lessee has expressly decided to purchase the asset regardless of its actual fair market value, it would be hard to attribute any expectation about a future purchase when the amount is not fixed but unknown. Leases with fixed-price purchase options will still continue to be written after Con Ed. However, until questions raised by the decision are settled, it is fair to assume that lessors will look more closely at the factors that tended to demonstrate or negate reasonable expectation in Con Ed. Lessors are also likely to continue to require the lessee to make representations with respect to its purchase options, particularly as to non-economic factors. Under a typical tax indemnity agreement between the lessor and lessee, if the lease is successfully challenged by the IRS because the representation was untrue, the lessee is liable to the lessor for an indemnity measured by the resulting loss of tax benefits.

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Philip H. Spector is a tax attorney with 25 years of experience in domestic and cross-border asset finance. He represents a variety of market participants in tax-based equipment leasing and project finance transactions. Spector can be reached at [email protected].

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In January, the U.S. Court of Appeals for the Federal Circuit handed down its decision in Consolidated Edison Company of New York, Inc. v. United States, No. 2012-5040 (Fed. Cir. 2013), rev'g 90 Fed. Cl. 228 (2009). See LJN's Equipment Leasing Newsletter Sept. 2008, Oct. 2008 and Jan. 2010. The decision reverses the only lower court case that had decided a LILO or SILO transaction in favor of the taxpayer, and likely ends the decade-long litigation of these contentious leveraged lease cases. While the reversal was not unexpected in light of recent appellate cases disallowing LILO/SILO tax benefits, the decision has had the, perhaps, unintended effect of calling into question the use of lessee fixed-price purchase options in sale-leasebacks and other more conventional equipment leasing transactions.

In a typical LILO, the taxpayer, acting through a grantor trust, leases assets from a tax-exempt entity (e.g., a domestic municipal transit agency or a foreign entity not subject to U.S. income taxation) under a primary or ”head” lease. A SILO transaction is similar, except that the head lease term is deliberately structured to extend beyond the remaining useful life of the asset, so that it is treated as a sale for tax purposes. At closing, the taxpayer will make a significant payment to the lessee, either the purchase price for the property (in a SILO) or a partial prepayment of its head lease. The taxpayer then leases the property back to the tax-exempt entity under a net lease, where the lessee retains substantially all rights and responsibilities to use and maintain the property during the lease term.

At the end of the lease, the lessee may exercise an option to acquire the taxpayer/lessor's interest in the property. The exercise price is a fixed amount determined at the inception of the transaction based on an appraisal. The price is equal to or greater than the property's projected fair market value at the lease expiration date. If the lessee does not exercise its option, what happens next varies from LILO to SILO. With a LILO, the taxpayer/lessor typically may compel the lessee to renew the sublease for an additional period (for rent set at 90% to 95% of the projected rental value). In a SILO, different options apply if the lessee elects not to exercise the purchase option. The lessee must locate a third-party operator for the property and obtain nonrecourse refinancing of the lessor's outstanding debt. Payments under the third-party service contract must be sufficient to repay the nonrecourse financing. The principal tax benefits claimed by the taxpayer are deductions for head lease rent (in a LILO) or for depreciation (in a SILO) and interest on the nonrecourse debt.

Controversial Financing and Security Arrangements

The financing and security arrangements for LILOs and SILOs are particularly controversial. The controversy arises from the “economic defeasance” of the lessee's obligations and the resulting circular pattern of the movement of borrowed funds and of rental and purchase option payments. At the closing of the typical transaction, nearly all of the proceeds of the sale of the property (or the head lease prepayment in the case of a LILO) are deposited by the lessee in deposit accounts and/or used to purchase payment undertaking agreements from affiliates of the lenders. These deposit accounts and similar arrangements are designed to generate revenues that match in timing and amount the lessee's on-going rent payment obligations and the fixed-price purchase option if the lessee elects to exercise it. The deposits are also pledged to the lessor as collateral security for the lessee's lease payment obligations. The remainder of the closing date proceeds that are not set aside in the defeasance accounts is retained by the lessee (usually around 5% to 10% of the proceeds and referred to by the IRS as the lessee's “accommodation fee”).

Taxpayers have been unsuccessful defending LILO/SILO transactions. Most courts have viewed the lessee's purchase option as reasonably certain to be exercised and paid from the defeasance accounts. Under this application of the “substance over form” doctrine, the taxpayer never acquired tax ownership of the property (or head lease interest in a LILO) because it was likely to be repurchased by the lessee. Because it was almost certain that the lessee would exercise its purchase option, the taxpayer's potential for upside appreciation in asset value was capped by the option and its downside residual value risk was minimized, depriving the lessor of the benefits and burdens of ownership. Exercise was almost certain because the defeasance accounts provided a ready source of funds, making the exercise “free” to the lessee (a misleading idea because the money in those accounts belonged to and would be required to be returned to the lessee if it did not exercise the purchase option). Exercise was also highly likely because the alternatives to the purchase option were too onerous, disruptive to the lessee's operations and more economically burdensome (costly) when compared with the purchase option. Exercise was also expected because the property was essential to the lessee's business operations, which were frequently assets that provided key services to the public ' like public transportation, water and electricity. See BB&T Corp. v. United States , 523 F.3d 461, 469 (4th Cir. 2008), AWG Leasing Trust v. United States , 592 F. Supp. 2d 953 (2008), Altria Group Inc. v. United States , 658 F.3d 276 (2d Cir. 2011), Wells Fargo & Co. v. United States , 641 F.3d 1319 (Fed. Cir. 2011). See LJN's Equipment Leasing Newsletter, March 2010 and July 2011.

A Sympathetic View

Until its reversal on appeal, Consolidated Edison was the only LILO/SILO case decided in favor of the taxpayer. The lower court took a much more sympathetic view of the evidence presented by the taxpayer as to the likelihood of exercise of the purchase option. Unlike in BB&T and AWG, the court did not consider the exercise of the purchase option a “virtual certainty.” In contrast to the open skepticism exhibited by other courts, the judge in Con Ed seemed favorably impressed with the thoroughness of the appraisal and other expert reports provided as proof that alternatives to the purchase option were viable and that the purchase option was not certain to be exercised. Taking the transaction as a whole, the effect of the defeasance accounts was to reduce credit risk. It did not release the lessee from the legal obligation to pay rent and did not render the nonrecourse debt illusory. Because exercise of the purchase option was not certain, the court believed the taxpayer's investment in the residual value of the lease remained subject to market risk and should be respected.

Moreover, although the decision did not ultimately turn on economic substance/business purpose grounds, the lower court found that the taxpayer had credibly demonstrated substantial business reasons for engaging in the transaction. Con Edison is a utility, its lessee was a Dutch utility and the property in question was an electric generation plant located in the Netherlands, so the asset had logical connections to Con Edison's own operating business (in distinction to most of the other LILO/SILO investors ' banks with no direct experience operating the kinds of assets leased). However, the strong business-purpose case was not enough to uphold the taxpayer victory on appeal.

On Appeal

The Con Ed decision was reversed on appeal on the grounds that it applied the wrong standard in evaluating whether the lessee's purchase option should be deemed exercised. The lower court had found for the taxpayer because (among other reasons) the taxpayer had demonstrated that the lessee's exercise of the purchase option was not a “virtual certainty.” Two years after the Con Ed lower court rendered its decision, the Circuit Court for the Federal Circuit handed down its opinion affirming the government's position in Wells Fargo. According to the Con Ed appeals court, its decision in Wells Fargo requires that the lessor not have a “reasonable expectation” that the lessee will exercise its purchase option. The appellate court then applied this correct standard to the lower court record and concluded that while exercise may not have been a virtual certainty, the evidence clearly supported the conclusion that Con Ed reasonably expected the lessee to exercise its purchase option. The Circuit Court explained as follows:

The Claims Court applied the wrong standard ' understandably because, at the time that it rendered its decision, the Claims Court here did not have the benefit of our Wells Fargo decision. ' While the district court found that the options at issue in Wells Fargo were virtually certain to be exercised and we held on appeal that this finding was not clearly erroneous, we made clear that the relevant standard was reasonable likelihood. In evaluating whether the LILO Transaction in this case must be recharacterized, Wells Fargo requires that we assess whether a prudent investor in ConEd's position would have reasonably expected that [the lessee] would exercise the purchase option. As we stated in Wells Fargo:

“We have never held that the likelihood of a particular outcome in a business transaction must be absolutely certain before determining whether the transaction constitutes an abuse of the tax system. The appropriate inquiry is whether a prudent investor in the taxpayer's position would have reasonably expected that outcome. Characterization of a tax transaction based on a highly probable outcome may be appropriate, particularly where the structure of the transaction is designed to strongly discourage alternative outcomes.”

641 F.3d at 1325-26 (emphasis added). This language makes clear that a “reasonable expectation” standard, rather than a “certainty” standard, governs the recharacterization of transactions under the substance-over-form doctrine.

Note that in the very same paragraph of the quoted language from Wells Fargo the court enunciated yet a third standard ' “highly probable.” It raises the question whether the Wells Fargo court really meant to be as definitive about “reasonable expectation” as the Con Ed court concludes. Since it is the same court, it is fair to conclude that they really did mean it.

The Real Legacy

The reversal of the decision in Con Ed is not controversial in the context of LILO/SILO transactions. After all, these transactions had fixed-price purchase options and defeasance accounts, funded at closing with 90%-95% of sale proceeds, that ballooned to the fixed option price, and that were pledged as collateral to secure the lessee's payment obligations (including the purchase option price). The assets that were the subject of these leveraged sale-leasebacks were in most cases essential to the lessee's business operations, in many cases assets used in providing a public service. The ease with which the lessee could simply apply the defeasance proceeds to re-acquire the property made exercise attractive, even if the fixed price marginally exceeded the costs and burdens the lessee would endure should it not exercise the purchase option. It is not a long jump from “virtual certainty” to “reasonable expectation” in the context of LILO/SILO transactions.

The real legacy of this particular opinion will be the scope of its application in simpler cases where it may be more difficult to evaluate the likelihood that the lessee will exercise a purchase option. Because the case involves a LILO/SILO transaction, the temptation is to assume that the case is “limited to its facts” and its principles not applicable outside the context of LILO/SILO or similarly complicated, tax-informed' leasing transactions. Because it is a LILO transaction, the Con Ed case is a relatively easy one to decide under the court's “reasonable expectation” standard. But what of other transactions that do not possess the features that create the fatal “ownership loop” in a LILO/SILO? Transactions with purchase options set at fair market value (rather than a fixed amount based on expected fair market value)? Transactions with no defeasance or with considerably less defeasance than LILO/SILO transactions?

Given the scope of the language used in the opinion (“a 'reasonable expectation' standard, rather than a 'certainty' standard, governs the recharacterization of transactions under the substance-over-form doctrine”), and the lack of any language limiting its application, will the IRS or a court require the lessor in any lease with a purchase option to demonstrate that it lacked a reasonable expectation that the lessee would exercise the option? If a lease has a lessee purchase option at fair market value, does this end the inquiry? If the lease has a fixed price purchase option but with little or no defeasance, does this preclude a reasonable likelihood of exercise? Can other, non-economic factors, create a reasonable expectation in the mind of a lessor that a lessee will exercise a purchase option? If so, how should a lessor go about creating a record that demonstrates that it was unaware of any such factors?

The Con Ed case provides some guidelines, at least in the LILO/SILO context. The court pointed to the following factors as indicating that the taxpayer failed to meet its burden of proving that the lessee's exercise of the purchase option is not reasonably likely. First, a record of a contemporaneous statement made by a Con Ed financial officer in response to a question from the taxpayer's accountant to the effect that the lessee's exercise was reasonably assured because the lessee had done its economic analysis on the assumption that the property would be repurchased. Second, the taxpayer's own internal financial projections did not fully evaluate the alternatives to the purchase option. Third, the appraisal obtained by the taxpayer (inexplicably) failed to mathematically demonstrate that the fixed purchase option price exceeded the costs that the lessee would incur if it elected an alternative end-of-term option, and hence that exercise of the purchase option was not economically compelled. Finally, non-economic factors, such as the asset being an essential operating asset and the lessee's financial accounting treatment, are considered along with the economic analysis.

One tax commentator has remarked about the Con Ed decision: “the result is what I would have expected to see in a sane world where a transaction is entered into predominantly for the tax benefits and would not have been entered into if those tax benefits did not exist.” Since he has described most leveraged and single-investor equipment leases, he apparently does not believe equipment leasing has a place in a “sane world.” Those familiar with the industry know he may be right.

Conclusion

I believe that pricing of end-of-term purchase options at then-current fair market value should go a long way toward meeting the no “reasonable expectation” standard. Unless the lessee has expressly decided to purchase the asset regardless of its actual fair market value, it would be hard to attribute any expectation about a future purchase when the amount is not fixed but unknown. Leases with fixed-price purchase options will still continue to be written after Con Ed. However, until questions raised by the decision are settled, it is fair to assume that lessors will look more closely at the factors that tended to demonstrate or negate reasonable expectation in Con Ed. Lessors are also likely to continue to require the lessee to make representations with respect to its purchase options, particularly as to non-economic factors. Under a typical tax indemnity agreement between the lessor and lessee, if the lease is successfully challenged by the IRS because the representation was untrue, the lessee is liable to the lessor for an indemnity measured by the resulting loss of tax benefits.

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Philip H. Spector is a tax attorney with 25 years of experience in domestic and cross-border asset finance. He represents a variety of market participants in tax-based equipment leasing and project finance transactions. Spector can be reached at [email protected].

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