Exhibit 10.41
TAX ALLOCATION AGREEMENT
AMONG
GREAT PLAINS ENERGY INCORPORATED
AND SUBSIDIARIES
This Tax Allocation Agreement ("Agreement") is entered into as of
October 1, 2001, by and among Great Plains Energy Incorporated
("GPE"), Kansas City Power & Light Company, Great Plains Power
Incorporated, Home Service Solutions Inc., Worry Free Services,
Inc., KLT Inc., KLT Investments Inc., KLT Investments II Inc.,
KLT Energy Services Inc., KLT Gas Inc., KLT Telecom Inc.,
Energetechs, Inc., Advanced Measurement Solutions, Inc., FAR Gas
Acquisitions Corporation, KLT Gas Operating Company, WYMO Fuels,
Inc., DTI Holdings, Inc., Digital Teleport, Inc., Digital
Teleport of Virginia, Inc. and Kansas City Power & Light
Receivables Company (collectively, the "members of Group" or
"Group" and individually "member of the Group" or "member").
WITNESSETH:
Whereas, the members of the Group are affiliated corporations
within the meaning of section 1504 of the Internal Revenue Code
of 1986, as amended (the "Code"), and will join in the annual
filing of a consolidated federal income tax return, and
Whereas, the members of the Group intend to allocate the
consolidated income tax liabilities and benefits to each member
of the Group in a fair and equitable manner, and
Whereas, the members of the Group intend to allocate the
liabilities and benefits arising from the Group's annual
consolidated income tax returns in compliance with 17 CFR
250.45(c) ("Rule 45(c)"), 26 CFR 1.1502-33(d)(2) and Section
1552(a)(1) of the Code.
NOW, THEREFORE; the parties agree as follows:
1. DEFINITIONS
"Consolidated tax" is the aggregate current Federal income tax
liability for a tax year, being the tax shown on the consolidated
Federal income tax return and any adjustments thereto.
"Corporate taxable income" is the taxable income of a member of
the Group for a tax year, computed as though such member had
filed a separate return on the same basis as used in the
consolidated return, except that dividend income from associate
companies shall be disregarded, and other intercompany
transactions eliminated in the consolidated return shall be given
appropriate effect.
"Corporate taxable loss" is the taxable loss of a member of the
Group for a tax year, computed as though such member had filed a
separate return on the same basis as used in the consolidated
return, except that dividend income from associate companies
shall be disregarded, and other intercompany transactions
eliminated in the consolidated return shall be given appropriate
effect.
1
"Separate return tax" is the tax on the corporate taxable income
of a member of the Group computed as though such company were not
a member of a consolidated group. If the separate return tax of
a member of the Group is a liability, it shall be referred to as
a "positive separate return tax"; if it is a refund or net tax
benefit, it shall be referred to as a "negative separate return
tax".
2. ALLOCATION OF TAX LIABILITY
The consolidated tax shall be allocated among the members of the
Group consistent with Rule 45(c) of the Public Utility Holding
Company Act of 1935, in the following manner:
a. The consolidated tax before tax credits of the Group will be
allocated to each member of the Group with corporate taxable
income before tax credits on the basis of the ratio of their
corporate taxable income before tax credits to the total of all
members of the Group with corporate taxable income before tax
credits.
b. An additional amount of consolidated tax before tax credits
will be allocated to each member of the Group equal to the
excess, if any, of the positive separate return tax before tax
credits of each member of the Group for the year over the tax
liability allocated to such member under the previous paragraph.
c. The total additional amounts of consolidated tax before tax
credits allocated under this procedure will be credited to those
members of the Group, excluding GPE, which had corporate taxable
losses, deductions or tax credits which serve to reduce the
consolidated tax. Thus, these members will be given the benefits
of the resulting reduction in the consolidated tax of the Group.
d. If GPE would have a negative separate return tax, then each
member having a positive separate return tax shall receive a
negative allocation in an amount equal to such negative separate
return tax multiplied by that member's share of the sum of the
positive separate return tax.
e. An allocation of the Alternative Minimum Tax ("AMT") will
only be performed when the consolidated return reflects an AMT
liability. In computing the allocation of the AMT, the same
computation methodology utilized in allocating the regular income
tax will be utilized. The consolidated AMT liability will be
allocated to each member of the Group with positive Alternative
Minimum Taxable Income ("AMTI") on the basis of the ratio of its
AMTI to the total of all members of the Group with positive AMTI.
An additional amount of AMT will be allocated to each member of
the Group based on the excess, if any, of the AMT liability that
would have been paid had the member of the Group filed a separate
tax return for the year over the AMT liability allocated to it
under the previous provision. The total additional amounts of
AMT charged under this provision will be allocated to each member
of the Group based on the ratio of its separate return AMTI to
the total AMTI of the members of the Group. In no event shall a
member of the Group be required to pay a greater
2
amount of AMT for any period than it would have been
required to pay had it filed a separate income tax
return for the period. Any excess of the consolidated
AMT allocated to a member of the Group under this
method over its separate return AMT will be allocated
among the other members of the Group using the
methodology described above. Any minimum tax credits
available for use in future periods will be allocated
to the members of the Group in the same ratio as the
taxes which gave rise to the credits. Minimum Tax
Credits used in the consolidated return will be deemed
to have been utilized on a first-in, first-out basis.
f. Any investment tax credits, other tax benefits and material
items taxed at rates other than the rate applicable to corporate
taxable income shall be allocated directly to the members of the
Group giving rise to them.
If the credit or benefit cannot be entirely utilized to
offset current consolidated tax, the consolidated
credit carry back or carry forward shall be apportioned
to those members of the Group giving rise to them in
proportion to the relative amounts of credits or
benefits generated by each such member of the Group.
g. If the amount of consolidated tax allocated to any member of
the Group, excluding GPE, exceeds the separate return tax of such
member of the Group, such excess shall be reallocated among those
members of the Group whose allocated tax liability is less than
the amount of their respective separate return tax liabilities.
Any remaining unallocated tax liability shall be assigned to GPE.
h. Pursuant to that certain Shareholders Agreement dated as of
February 6, 2001, among KLT Telecom Inc., DTI Holdings, Inc. and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, the net operating losses incurred after
February 8, 2001 by DTI Holdings, Inc., Digital Teleport, Inc.
and Digital Teleport of Virginia, Inc. (each an "Excluded
Company") shall be allocated to and used by KLT Telecom Inc.,
except to the extent the Excluded Companies would otherwise have
corporate taxable income in the same tax year in which the
members of the Group use such net operating losses. KLT Telecom
Inc. and the Excluded Companies acknowledge that the Shareholders
Agreement does not provide for, and does not contemplate,
reimbursement of any loss or credit availed of by KLT Telecom
Inc. or other members of the Group, and that such was part of the
bargained-for consideration to be received by KLT Telecom Inc. in
the transactions associated with the execution of the
Shareholders Agreement. Accordingly, the income, gain, loss,
deductions and credits of each of the Excluded Companies shall be
taken into account in the determination of KLT Telecom Inc.'s
apportioned obligation for the consolidated income tax under this
Agreement, and payments on account thereof shall solely be made
between GPE and KLT Telecom Inc. The obligations between KLT
Telecom Inc. and the Excluded Companies shall be controlled by
the Shareholders Agreement, and payments shall be made among such
parties in accordance with such agreement and consistent with
this Agreement.
3
Subsequent to the execution of the Shareholders
Agreement, KLT Telecom Inc. and the Excluded Companies
became subsidiaries of GPE, a registered holding
company. The terms and conditions of Shareholders
Agreement respecting tax allocations may be deemed
inconsistent with the requirements of Rule 45(c)(4),
and KLT Telecom Inc., the Excluded Companies and the
other members of the Group agree to seek any necessary
Securities and Exchange Commission authorization to
allocate tax losses and credits as set forth in the
first paragraph of this Section h. Notwithstanding
anything in the first paragraph of this Section h. to
the contrary, if required by Rule 45(c)(4) and only to
the extent required under Rule 45(c)(4) the following
paragraph shall be effective until such authorization
is received:
If an Excluded Company will not have a positive
separate return tax for a tax year, such Excluded
Company shall be excluded from the allocation of the
consolidated tax liability and, thus, such Excluded
Company shall not receive any payment from KLT
Telecom Inc. as a result of any such loss or credit
attributable to an Excluded Company. If and when an
Excluded Company would have been able to utilize any
previous losses or credits if, under the applicable
tax law, it had filed a tax return on a separate
basis, KLT Telecom Inc. shall pay to the appropriate
Excluded Company an amount equal to the refund which
such Excluded Company would have realized as a
result of the carry over of such loss or credit,
with such amount payable by KLT Telecom Inc. in the
year in which such Excluded Company would have
received the refund for such loss or credit on a
separate return basis.
If any amounts are deemed payable by KLT Telecom Inc.
to an Excluded Company pursuant to the preceding
paragraph, the Excluded Companies shall be deemed to
have distributed any such amounts to KLT Telecom Inc.,
to the extent any such amounts may properly be
distributed to KLT Telecom Inc. under state and Federal
law.
i. In the event a corporation leaves the Group, it shall
immediately cease being a party to this Agreement and shall not
be entitled to any further payments or other benefits pursuant to
this Agreement.
3. PAYMENT OF TAXES
a. Payment of the taxes for the period by each member of the
Group will represent the total taxes allocated to such member
under the principles described above. These payments will be
made no less frequently than annually and no more frequently than
quarterly in connection with the estimated tax installments.
b. A member of the Group with a net positive allocation
shall pay GPE the net amount allocated. A member of
the Group with a net negative allocation shall receive
payment from GPE in the amount of the net negative
allocation. GPE shall pay or cause to be paid to the
Internal Revenue Service the Group's net current
federal
income tax liability from the net of the receipts and
payments to and from members of the Group.
c. GPE will make any calculations on behalf of the members
of the Group necessary to comply with the estimated tax
provisions of Section 6655 of the Code. Based on such
calculations, GPE shall charge the members of the Group
appropriate amounts at intervals consistent with the
dates in that section.
4. TAX ADJUSTMENTS
If the consolidated tax liability is adjusted for any taxable
period, whether by means of an amended return, claim for refund,
after a tax examination by the Internal Revenue Service or
otherwise, the liability of each member of the Group shall be
recomputed to give effect to such adjustments. In the case of a
refund, GPE shall reimburse each member of the Group with its
allocable share of such refund within forty-five (45) business
days of receipt of such refund. In the case of an increase in
tax liability, each member of the Group shall pay to GPE it
allocable share of such increased tax liability with within forty-
five (45) business days after receiving notice of such liability
from GPE.
5. INTER-PERIOD ADJUSTMENTS
If for any taxable year the Group has a net operating loss, a net
capital loss, or is entitled to any credits against tax that may
be carried back or forward to other year(s), the tax allocation
for the other year(s) will be recomputed to include these items.
This recomputation shall treat the item as if it existed in the
year to which it was carried. Under this recomputation, the
regular income tax, tax credits, and alternative minimum tax will
be recomputed. Any prior allocation and payment of taxes between
the members of the Group shall be adjusted according to this
revised computation.
6. TERM OF AGREEMENT
This Agreement shall apply to the taxable year ending December
2001, and all subsequent taxable periods unless the members of
the Group agree to terminate this Agreement. Notwithstanding
such termination, this Agreement shall continue in effect with
respect to any payments or refunds due for all taxable periods
prior to termination. This Agreement may be amended from time to
time by the written consent of all members of the Group.
7. INCLUSION OF ACQUIRED OR CREATED SUBSIDIARY
The members of the Group will cause any corporation which becomes
an affiliated corporation within the meaning of Section 1504 of
the Code to join in this Agreement.
5
8. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of
any successor to a member of the Group, whether by statutory
merger, acquisition of assets or otherwise, to the same extent
that the successor would have been required or eligible to be an
original party to the agreement.
9. CHOICE OF LAWS
This Agreement shall be construed and enforced in accordance with
the laws of the State of Missouri, without giving effect to that
State's conflict of laws provisions.
10. PRIOR AGREEMENTS SUPERSEDED
This Agreement replaces and supersedes all prior agreements among
the members of the Group related to the subject matter hereof,
including but not limited to that certain Tax Sharing Agreement
between Kansas City Power & Light Company and Subsidiaries, dated
as of March 31, 1994, as amended.
IN WITNESS WHEREOF, the parties have signed this Agreement as of
the first above written.
Great Plains Energy Great Plains Power Incorporated
Incorporated
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Kansas City Power & Light Home Service Solutions, Inc.
Company
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
KLT Inc. KLT Energy Services Inc.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
6
KLT Investments Inc. KLT Gas Inc.
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
KLT Investments II Inc. KLT Telecom Inc.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Worry Free Services, Inc. KLT Gas Operating Company
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
FAR Gas Acquisitions DTI Holdings, Inc.
Corporation
By: /s/▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
President
Digital Teleport, Inc. Digital Teleport of Virginia,
Inc.
By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ By: /s/▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Energetechs, Inc. WYMO Fuels, Inc.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Kansas City Power & Light
Receivables Company
By: /s/▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
7