InterpretationGap® Tax Insurance

Ambridge's InterpretationGap® Tax Insurance product provides insurance to reduce or eliminate the uncertainty relating to the outcome of one or more tax issues by providing reimbursement for financial loss incurred as a result of a successful challenge by the relevant tax authority.

The most common applications for InterpretationGap® Tax Insurance are in situations where:

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no clear guidance from the applicable tax authority or tax law precedent is available;
a taxpayer is unable or unwilling to tolerate uncertainty because of the magnitude of the financial
exposure relative to the size of a transaction;
a buyer has not identified any specific tax issue, but wants to prudently minimize risk relating to the seller's pre-closing tax issues; and
parties to a transaction cannot agree on the allocation of potential pre-closing tax liabilities.

InterpretationGap® Tax Insurance can also be an effective complement to private letter rulings. Since private letter rulings are issued in reliance upon representations made in the ruling request, the product can be utilized to provide a taxpayer with protection for certain representations that it has made in reliance upon statements made by a third party, such as the party that sold the asset or business at issue.

InterpretationGap® Tax Insurance can be designed to include coverage for the following components of financial loss:

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additional tax;
interest and penalties imposed on such additional tax; and
the amount by which the taxpayer's taxes are increased as a result of the payment of proceeds under the InterpretationGap® policy (i.e. "gross-up" coverage).

In addition, to further align the policy with the specific tax issue(s), the policy can be designed to:

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cover the subject matter of a tax opinion or tax indemnity, although an opinion or indemnity is not required for the insurance to be put in place to provide coverage for the specific tax issue(s); and
match the statute of limitations for the specific tax issue(s), up to eighty-four (84) months. Longer policy terms may be available on a case-by-case basis.

Regardless of the situation that requires certainty with respect to a specific tax issue, Ambridge's experienced underwriting team will work with you to provide your clients with the InterpretationGap® Tax Insurance solution they require.

Please note that Ambridge Partners does not underwrite any insurance product in connection with taxes, interest or penalties that may be incurred with respect to any "reportable transaction" within the meaning of Treasury Regulation section 1.6011-4(b).