Tax Receivable Agreement

The passage of the tax reform last December gave investors greater security when it comes to corporate tax rates in the near future. One of the consequences is an increased interest on the part of some investors in the acquisition of payment rights under so-called “tax receivables” (“TRAs”) agreements. In short, TRAS are agreements entered into by a company (a “Pubco”) as part of an initial public offering (“IPO”) to monetize the tax characteristics of the post-IPO pubco for the benefit of pre-IPO owners and investors who acquire payment rights under TRAs from these pre-IPO owners. Our previous article on TSEs focused on some of the ways in which tax reform could affect the value of AER`s payment entitlements.