Bidding on a Public-Private Partnership (P3) concession raises numerous challenging and material tax assumptions that are embedded in your bid model.
Our M&A tax experts have decades of experience with P3s in the US and Canada, providing you with deep tax technical and financial modeling skills to help you efficiently develop your financial model to accurately reflect the relevant tax assumptions. We have advised numerous clients on myriad concession arrangements from revenue risk type concessions such as for toll-roads, parking meters, parking garages, and airport terminals, to availability payment structures including for courthouses, universities, CONRAC, and other arrangements.
What We Can Do For You
- Review the concession documentation and financial model to analyze the nature of the concession arrangement to determine its characterization for US or Canadian federal income tax purposes.
- Based on this analysis, advise on the numerous income tax assumptions that will need to be addressed in your financial model, including:
- Tax characterization of the concession,
- Implications of potential “tax ownership” of the concession, and
- Taxation of interest and timing of its deductibility.
- Advise on critical non-income tax assumptions such as property tax and sales tax matters to ensure that your bid properly reflects these taxes or that you are contractually protected from its imposition.
- Advise on optimal structuring of the project entity considering the investor base.
- Advise on modeling state income taxes and whether the state tax rules are consistent with the federal tax rules.
Critical Tax Assumptions
Among the various tax issues to be analyzed include analysis of the purchase consideration to enter a brownfield concession to determine how the purchase consideration should be amortized/depreciated during the term of the concession. This issue also arises in the greenfield context, where, as opposed to purchase consideration, payments are made to build an asset that will be utilized during the term of the concession.
From a state, provincial and local tax perspective, we will consider the numerous local taxes that may apply to your concession and analyze, in particular, property tax and sales tax implications. Note regarding these taxes that unique laws and exceptions to exemptions may apply due to potential P3 ownership or leasing of such assets.
Financial Modeling
Financial modeling is key to providing accurate tax advice in terms of properly implementing the technical tax rules as relevant to the concession arrangement. We will review your bid model and provide the necessary guidance in updating or building the relevant tax components of the model to ensure that your bid is based on accurate tax inputs, including federal, state, local and property taxes.
Tax Structuring
Although concessionaire entities are generally structured as LLC entities taxed as partnerships, we will consider your investor LP base to advise on optimal holding company structures for your LPs to directly or indirectly own the concessionaire entity to help increase the projected post-tax IRR for your LPs.
Concession Documentation Review
We will review and comment on concession agreements and related documentation to help you avoid pitfalls including commenting on state tax risks including property and sales tax risk where such risk should reside with the authority/municipality.
Let’s work together.
You want an M&A tax expert who gets it. A commercially minded expert who understands deals, not just taxes. A partner who shares your drive for minimizing risk, maximizing value, and accelerating returns.
That’s Leo Berwick. The first call you make for any deal.