Qualified Service Contracts - Rev. Proc. 97-13. A Service Contract is considered to contain termination penalties if the termination limits the Recipient’s right to compete with the Service Provider, requires the Recipient to purchase equipment, goods or services from the Service Provider, or requires the Recipient to pay liquidated damages for cancellation of the Service Contract. Another contract between the Service Provider and the Recipient (for example, a loan or guarantee by the Service Provider) is considered to create a contract termination penalty if that contract contains terms that are not customary or arm’s length that could operate to prevent the Recipient from terminating the Service Contract. A requirement that the Recipient reimburses the Service Provider for ordinary and necessary expenses, or restrictions on the hiring by the Recipient of key personnel of the Service Provider are not treated as contract termination penalties. If the Recipient chooses to apply the following safe harbors, a Service Contract is a Qualified Service Contract if entered into before (and not materially modified after) August 18, 2017 and all of the following conditions are satisfied:
Qualified Service Contracts - Rev. Proc. 2017-13. Unless the Recipient chooses to apply the safe harbors described below in F.2.b. for Service Contracts (defined below) entered into before (and not materially modified after) August 18, 2017, an arrangement under which services are to be provided by a Private Person (“Service Provider”) involving the use of all or any portion of, or any function of, the Project (for example, the management services for an entire facility or a specific department of a facility) (“Service Contract”) is a “Qualified Service Contract” if either (A) the only compensation provided for in the Service Contract consists of reimbursements of actual and direct expenses paid by the Service Provider to persons other than Related Parties and reasonable related administrative overhead expenses of the Service Provider (“Expense Reimbursement”) or (B) all of the following conditions are satisfied:
Qualified Service Contracts - Rev. Proc. 2017-13. Unless the Recipient chooses to apply the safe harbors described below in F.2.b. for Service Contracts (defined below) entered into before (and not materially modified after) August 18, 2017, an arrangement under which services are to be provided by a Private Person (“Service Provider”) involving the use of all or any portion of, or any function of, the Project (for example, the management services for an entire facility or a specific department of a facility) (“Service Contract”) is a
