Exhibit 10.32
FEDERAL INCOME TAX ALLOCATION
AGREEMENT
Federal Income Tax Allocation
Agreement (“Agreement”) made and entered into as of
October 1, 2008, by and between United Insurance Holdings
Corp., a Florida corporation (“Parent”), United
Insurance Holdings, L.C., a wholly owned single-member LLC,
(“UIH”), United Insurance Management, L.C., a wholly
owned single-member LLC, (“UIM”), Skyway Claims
Services, LLC, a wholly owned single-member LLC,
(“SCS”), and United Property & Casualty
Insurance Company (“UPCIC”). UIH, UIM, SCS, and UPCIC
are sometimes hereinafter referred to as Subsidiary. Parent, UIH,
UIM, SCS, and UPCIC are sometimes hereinafter referred to severally
as a “Member” and collectively as the “Affiliated
Group.”
WITNESSETH:
WHEREAS , Parent and UPCIC are an affiliated group
within the meaning of Code Section 1504(a) and the related
Regulations, and therefore, are eligible to file a consolidated
income tax return for federal income tax purposes; and
WHEREAS , the Affiliated Group intends to file
consolidated federal income tax returns for so long as Parent shall
determine; and
WHEREAS , the Affiliated Group wishes to allocate the
consolidated federal income tax liability to UIH, UIM, and SCS as
if they were corporations; and
WHEREAS , the Affiliated Group desires to establish a
method for allocating the consolidated federal income tax liability
of the Affiliated Group among the Members in an agreed fashion and
to compensate any Member for use of its net operating and net
capital losses, and tax credits utilized in computing consolidated
federal taxable income, and to provide for the allocation and
payment of any refund arising from a carryback of net operating or
capital losses, or tax credits generated in subsequent taxable
years.
NOW THEREFORE
, in consideration of their mutual
covenants herein, the Members agree as follows:
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1.
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Consolidated Return Election
. If at any time and from time to time Parent so
elects, all Members will join in the filing of a consolidated
federal income tax return for the Affiliated Group for such initial
period, and for any subsequent taxable period for which the
Affiliated Group is required or permitted to file such a return.
Each Member agrees to file such consents, elections and other
documents and take such other action as may be necessary or
appropriate to carry out the purpose of this Paragraph 1. Any
period for which a Member is included in a consolidated federal
income tax return filed by the Affiliated Group is referred to in
this Agreement as a “Consolidated Return
Year.”
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2.
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Appointment of Parent as Agent.
Parent is hereby appointed as agent
for the Subsidiaries in the preparing and filing of tax returns and
payment of consolidated federal income taxes, pursuant to the
applicable provisions of the Code for the initial tax year, and any
tax year thereafter where 80 percent or more of the issued and
outstanding stock of a Subsidiary as defined in Code
Section 1504(a)(2) and the related Regulations is owned
directly or indirectly by the Parent for all or any portion of such
year.
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Page 1
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3.
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Payment
to Parent by Subsidiary . The Subsidiaries agree to pay Parent for all
years or portions of years where the Subsidiary is included in the
consolidated federal income tax return with Parent the portions of
the consolidated federal income tax liability attributable to the
Subsidiary as determined in accordance with Paragraph 4, below. All
tax payments are to be settled within 90 days of filing the tax
return.
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4.
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Computation of Tax Liability to Parent for
Consolidated Return Year .
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a)
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Each Subsidiary
agrees to pay to Parent, at the times specified in Paragraphs 5 and
6, the amount (if any) of the consolidated federal income tax
liability attributable to the Subsidiary determined under the
methods prescribed in Regulation Sections 1.1552-1(a)(1) and
1.1502-33(d)(3). The percentage method compensates a Member for the
use of its losses in the year a Member’s losses are absorbed
by the Affiliated Group.
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b)
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The absorption
of losses under the percentage method shall first be determined by
the year in which such losses were generated. All losses shall be
absorbed in the order in which they were generated.
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c)
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Parent shall
calculate the payments due to it from the Subsidiaries under this
Paragraph 4, and Paragraphs 5 and 6, in a manner consistent with
the tax elections, methods of accounting, and other positions taken
by Parent on the Affiliated Group’s consolidated federal
income tax return.
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d)
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Any
consolidated alternative minimum tax (“AMT”) will be
allocated among the Parent and the Subsidiaries in accordance with
the provisions of Proposed Regulation
Section 1.1552-1(g).
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5.
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Interim
Estimated Payments. The Subsidiaries shall advance to Parent amounts
necessary to reimburse Parent for that portion of any estimated
federal income tax payments attributable to the inclusion of such
Subsidiary in the Affiliated Group. These amounts shall be computed
on an interim basis as described in Paragraph 4. The Subsidiaries
shall pay Parent within 30 days of receiving notice from the Parent
of the amount due. Any amounts so paid for any year shall be
credited against the amounts payable to Pare
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