Tax Indemnity policies insure against the contingent outcome of known tax risks. BlueChip focuses on tax risks present within a merger or acquisition that are not typically covered under a Representations & Warranties policy. A Tax Indemnity insurance policy can serve as another way for buyers and sellers to mitigate such risks.
A Tax Indemnity policy in the merger or acquisition context may be used to insure against unfavorable tax resolution outcomes for the following issues:
- S-Corp status of a target company
- Availability of net operating loss carry-forwards
- Validity of Section 338 elections
- Availability of solar energy tax credits
- Public company reserves for uncertain tax positions