Computation of Tax Loss and Tax Indemnity. Any tax indemnity payable by EME shall be computed based on the Tax Assumptions and shall be computed by assuming that at all times (A) the Owner Participant has sufficient federal taxable income to make full use of the tax benefits that are subject to the Tax Loss in the year in which all of such tax benefits were assumed to be available (and in future years with respect to tax benefits that result from the Tax Loss) and (B)(i) for purposes of calculating payments necessary to make such payment on an After-Tax Basis, and for purposes of calculating an amount or amounts in the case of an Inclusion Loss, the Owner Participant’s effective federal income tax rate is the highest marginal U.S. federal income tax rate applicable to corporations generally for the relevant period or periods and (ii) for all other purposes, the Owner Participant’s effective federal income tax rate is the Assumed Tax Rate. If the Owner Participant shall be required pursuant to a Final Determination to accrue Basic Lease Rent and Renewal Rent at a rate less accelerated than that assumed in the Tax Assumptions, then Midwest shall be permitted to defer the equity portion of Basic Lease Rent and adjust Termination Value, by such amounts and to such dates as shall preserve the Owner Participant’s Expected Return. In this regard, the Owner Participant agrees to use reasonable good faith efforts to file and diligently pursue a protective claim for refund with respect to any year as to which the IRS has challenged, pursuant to Section 467 of the Code, the rental deductions claimed by Midwest, if Midwest or EME shall so request.
Computation of Tax Loss and Tax Indemnity. Any tax indemnity payable by the Facility Lessee or Tax Savings payable by the Owner Participant shall be computed based on the Tax Assumptions and shall be computed by assuming that at all times (A) the Owner Participant has sufficient federal, state and local taxable income to make full use of the tax benefits that are subject to the Tax Loss in the year in which all of such tax benefits were assumed to be available (and in future years with respect to tax benefits that result from the Tax Loss) and (B) the Owner Participant's combined marginal federal, state and local income tax rate is the Assumed Tax Rate (other than for purposes of calculating (i) payments necessary to make such payment on an After-Tax Basis and (ii) an amount or amounts in the case of an Inclusion Loss, in which case such calculation shall be made using the highest Conemaugh Tax Indemnity Agreement marginal U.S. federal, state and local income tax rates applicable to corporations generally for the relevant period or periods taking into account the deductibility of state and local taxes for U.S. federal income tax purposes). Notwithstanding the previous sentence, if, and only if, Periodic Lease Rent and Termination Value have been computed on the assumption that the Owner Participant will be entitled to state income tax benefits, will the amount of any income tax indemnification payable by the Facility Lessee to the Owner Participant, or as the case may be, any reverse tax indemnity payable by the Owner Participant to the Facility Lessee, reflect such state income tax benefits. Any reverse indemnity payment will not be in excess of the amount of the indemnity previously paid by the Facility Lessee (with any excess reverse indemnity amounts being available as an offset against future federal income tax indemnities otherwise payable by the Facility Lessee). Although the Owner Participant will covenant that it will file its income tax returns by accruing Periodic Rent in accordance with the Tax Assumptions, if the Owner Participant shall be required or permitted pursuant to a Final Determination to accrue Periodic Lease Rent at a rate less accelerated than that assumed in the Tax Assumptions and as a result the Facility Lessee suffers adverse tax consequences on an actual basis, the Facility Lessee shall be permitted to defer the equity portion of Periodic Lease Rent or Termination Value by such amounts and to such dates as shall preserve the Owner Participant's Expected Return (compute...
