ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
Template prepared by Calderwood & Harkness LLP One Liberty Plaza, 45th Floor New York, NY 10006
Date of Preparation: May 28, 2024 Engagement No. 1001-00006 Matter No. 1001-00006
This is a blank form for use by each rollover participant receiving unvested Class B Units of Ardent Healthcare Holdings LLC in connection with the closing of the acquisition of Pinnacle Health Services Group LLC. Each participant must complete, sign, and file this election with the Internal Revenue Service within thirty (30) days of the date on which the property was transferred to the participant. The transfer date is the closing date of the transaction as set forth in the Agreement and Plan of Merger, dated as of [●], 2024, by and among Ardent Healthcare Holdings LLC, [●] Merger Sub LLC, and Pinnacle Health Services Group LLC (the "Merger Agreement"). Copies of the completed and signed election must also be provided to Ardent Healthcare Holdings LLC (as the transferor and service recipient entity) and attached to the taxpayer's federal income tax return for the taxable year in which the transfer occurs. Please refer to the Filing Instructions appended hereto for detailed guidance on where and how to file this election.
FILING DEADLINE REMINDER
The property transfer date is [Insert Closing Date]. This election must be filed with the Internal Revenue Service no later than [Insert date that is 30 days after Closing Date]. FAILURE TO TIMELY FILE THIS ELECTION WILL RESULT IN THE TAXPAYER RECOGNIZING ORDINARY INCOME AS THE PROPERTY VESTS, RATHER THAN AT THE TIME OF TRANSFER. THERE IS NO PROVISION UNDER CURRENT LAW FOR RELIEF FROM A LATE-FILED SECTION 83(b) ELECTION. EACH TAXPAYER IS STRONGLY URGED TO FILE THIS ELECTION PROMPTLY AFTER CLOSING AND TO RETAIN PROOF OF MAILING.
SECTION 83(b) ELECTION
Section 1. Identification of Taxpayer
The following information identifies the taxpayer making this election:
Taxpayer Name: [Insert full legal name of taxpayer/electing individual]
Taxpayer Address: [Insert street address, city, state, ZIP code]
Taxpayer Social Security Number: [Insert SSN: xxx-xx-xxxx]
Taxable Year: The taxable year for which this election is being made is the calendar year ending December 31, [__].
Section 2. Description of Election
The undersigned taxpayer hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended (the "Code"), and Treasury Regulations Section 1.83-2 promulgated thereunder, with respect to the property described below. This election is made to include in gross income, as compensation for services, the excess (if any) of the fair market value of the property at the time of transfer over the amount paid for such property, notwithstanding that such property is subject to a substantial risk of forfeiture within the meaning of Section 83(a) of the Code.
The following information is provided in accordance with Treasury Regulations Section 1.83-2(e):
Section 3. Identification of Property
Description of property with respect to which the election is being made:
[Insert number] Class B Units (the "Units") of Ardent Healthcare Holdings LLC, a Delaware limited liability company (EIN: [Insert EIN]), issued pursuant to the terms of the Amended and Restated Limited Liability Company Agreement of Ardent Healthcare Holdings LLC, dated as of [Insert Closing Date] (the "LLC Agreement"), in connection with the closing of the transactions contemplated by the Merger Agreement.
Instruction: Describe the class of units received, distinguishing between vested and unvested units. This election applies only to the unvested Units received by the taxpayer that are subject to a substantial risk of forfeiture within the meaning of Section 83(c) of the Code. If the taxpayer received both vested and unvested Units at closing, specify the number of unvested Units to which this election pertains. Vested Units are not subject to Section 83(b) and should not be included in this election.
Section 4. Date of Transfer
Date on which the property was transferred to the taxpayer:
[Insert date of property transfer / closing date]
Instruction: This is the date on which the taxpayer received the Units. The transfer date is the closing date of the transaction pursuant to the Merger Agreement. Under Treasury Regulations Section 1.83-3(a), property is transferred when a person acquires a beneficial ownership interest in such property. For purposes of this election, the transfer date is the date on which the Class B Units were issued to the taxpayer under the LLC Agreement.
Section 5. Taxable Year
The taxable year for which this election is made:
Calendar year ending December 31, [__].
Section 6. Nature of Restrictions
Description of the restrictions to which the property is subject:
The Units are subject to the following restrictions, which constitute a substantial risk of forfeiture within the meaning of Section 83(c) of the Code:
[Insert description of vesting schedule and forfeiture conditions, including the information described below.]
Instruction: Describe the substantial risk of forfeiture in detail, including the following:
(a) the percentage and number of Units that are vested as of the closing date versus the percentage and number of Units that are unvested as of the closing date;
(b) the vesting schedule applicable to the unvested Units, including the period over which vesting occurs and the rate of vesting (e.g., ratable monthly vesting over [●] months from the closing date, with [●]% of the unvested Units vesting on each monthly anniversary of the closing date);
(c) any conditions upon which vesting is contingent, including but not limited to continued employment with, or continued provision of services to, Ardent Healthcare Holdings LLC or any of its subsidiaries or affiliates, or the achievement of specified performance milestones;
(d) whether vesting accelerates upon the occurrence of specified events, including a change of control, termination without cause, termination for good reason, death, or disability, and the terms and conditions of any such acceleration; and
(e) the consequences of a forfeiture event, including whether unvested Units are forfeited for no consideration, repurchased by the issuing entity at cost, repurchased at fair market value, or subject to other terms upon the taxpayer's cessation of employment or service prior to full vesting.
Example description (for reference only — do not include this example in the filed election; replace with the actual terms applicable to the taxpayer):
"Of the [●] Class B Units received by the taxpayer at closing, [●] Units ([●]%) are fully vested as of the closing date, and [●] Units ([●]%) are unvested as of the closing date (the 'Unvested Units'). The Unvested Units are subject to time-based vesting, with [●]% of the Unvested Units vesting on each monthly anniversary of the closing date over a period of [●] months, subject to the taxpayer's continued employment with Ardent Healthcare Holdings LLC or one of its subsidiaries through each applicable vesting date. In the event the taxpayer's employment is terminated for any reason prior to full vesting, any then-unvested Units will be forfeited for no consideration [or repurchased by the Company at the lesser of cost and fair market value]."
Section 7. Fair Market Value of Property
Aggregate fair market value of the property at the time of transfer (determined without regard to any restriction other than a restriction which by its terms will never lapse):
$[Insert FMV amount]
Instruction: Insert the aggregate fair market value of the unvested Units as of the transfer date, determined without regard to any lapsing restriction (e.g., vesting conditions or transfer restrictions that will lapse upon the occurrence of specified events). Restrictions that will never lapse — such as permanent restrictions on transferability set forth in the LLC Agreement — should be taken into account in determining fair market value.
For profits interests issued at or above the liquidation value threshold established under the LLC Agreement (consistent with the safe harbor described in Revenue Procedure 93-27, 1993-2 C.B. 343, and Revenue Procedure 2001-43, 2001-2 C.B. 191), the fair market value of the Units may be zero ($0.00) if the Units have no liquidation value at the time of grant — i.e., if the distribution threshold applicable to the Class B Units equals or exceeds the fair market value of the Company's assets at the time of issuance. The taxpayer should consult with his or her own tax advisor regarding the determination of fair market value.
Section 8. Amount Paid for Property
Amount paid by the taxpayer for the property:
$[Insert amount paid, if any]
Instruction: If the Units were received in exchange for cash, insert the dollar amount of cash paid. If the Units were received in exchange for a contribution of property (e.g., membership interests in Pinnacle Health Services Group LLC or another acquired entity rolled over into the acquiring entity), describe the nature of the consideration contributed and the fair market value of such contributed property. If the unvested Units constitute profits interests with no capital shift at issuance and the taxpayer made no payment or contribution of property in exchange for such Units, the amount paid is $0.00.
Section 9. Excess of Fair Market Value over Amount Paid
The amount to include in gross income for the taxable year of the transfer is:
$[Insert amount, being the excess of FMV (Section 7 above) over amount paid (Section 8 above)]
Instruction: This is the amount the taxpayer elects to include in gross income as compensation income for the taxable year in which the transfer occurred, computed as the excess (if any) of the aggregate fair market value of the property at the time of transfer (as stated in Section 7 above) over the amount paid by the taxpayer for the property (as stated in Section 8 above). For profits interests qualifying under Revenue Procedure 93-27 and Revenue Procedure 2001-43, this amount may be $0.00. Even if the amount to be included in gross income is $0.00, this election must still be timely filed with the Internal Revenue Service.
Section 10. Statement Regarding Furnished Copies
A copy of this election has been furnished to Ardent Healthcare Holdings LLC, at the address set forth below. A copy of this election will also be attached to the undersigned taxpayer's federal income tax return for the taxable year in which the above-described transfer was made, in accordance with Treasury Regulations Section 1.83-2(c).
Name of transferor / service recipient:
Ardent Healthcare Holdings LLC
Address of transferor / service recipient:
[Insert registered address and/or principal business address of Ardent Healthcare Holdings LLC]
Attention: [Insert appropriate contact name and/or title, e.g., General Counsel or Chief Financial Officer]
Section 11. Signature
The undersigned taxpayer certifies that the foregoing statements are true, correct, and complete to the best of the taxpayer's knowledge and belief.
________________________________________
Signature of Taxpayer
Printed Name: [Insert taxpayer name]
Date: [Insert date of execution]
If the taxpayer is married and files a joint federal income tax return, the taxpayer's spouse should also sign below:
________________________________________
Signature of Spouse
Printed Name of Spouse: [Insert spouse name, if filing jointly]
Date: [Insert date]
Instruction: If the taxpayer is married and files a joint federal income tax return for the taxable year in which the transfer occurs, both spouses should sign this election. The taxpayer should consult with his or her own tax advisor regarding the applicability of community property laws in the taxpayer's state of residence, as community property rules may affect the tax treatment of the Units and the Section 83(b) election.
FILING INSTRUCTIONS
Appendix to Section 83(b) Election
The following instructions are provided for the convenience of taxpayers completing and filing the attached Section 83(b) Election in connection with the receipt of unvested Class B Units of Ardent Healthcare Holdings LLC. These instructions do not constitute tax advice, and each taxpayer should consult with his or her own tax advisor regarding the filing of this election.
A. Where to File
IRS Filing: The original signed election must be mailed to the Internal Revenue Service Center where the taxpayer files his or her federal income tax return. The taxpayer should send the election via certified mail, return receipt requested (United States Postal Service), in order to preserve documentary proof of timely filing. The taxpayer should retain the certified mail receipt and the signed return receipt (green card) as evidence that the election was mailed and received by the IRS within the 30-day filing window.
The applicable IRS Service Center address depends on the taxpayer's state of residence. The taxpayer should refer to the instructions for the taxpayer's most recently filed Form 1040 (or Form 1040-SR, as applicable) to determine the correct IRS Service Center address.
IRS Service Center Address:
[Insert applicable IRS Service Center address based on taxpayer's state of residence]
Note: As of the date of preparation of this form, the IRS does not accept Section 83(b) elections filed electronically. The election must be filed by mail. Taxpayers should confirm the correct filing address and acceptable methods of filing with their tax advisors, as IRS addresses and procedures may change from time to time.
B. Filing Deadline
The election must be filed with the Internal Revenue Service no later than thirty (30) days after the date on which the property was transferred to the taxpayer. The transfer date (closing date) is [Insert Closing Date]. The filing deadline is therefore [Insert date that is 30 days after Closing Date].
There is no provision under current law for relief from a late-filed Section 83(b) election. The Internal Revenue Service has no authority to grant extensions of the 30-day filing period, and the Tax Court and federal courts have uniformly held that the 30-day deadline is jurisdictional and cannot be waived. Accordingly, if the election is not postmarked on or before the 30th day following the transfer date, the election will be treated as invalid, and the taxpayer will be required to recognize ordinary income as the Units vest over time (rather than at the time of transfer).
Taxpayers are strongly encouraged to file this election as soon as practicable after the closing date and not to wait until the last day of the 30-day period.
C. Copies to Be Provided
In addition to filing the original signed election with the Internal Revenue Service, the taxpayer must provide copies as follows:
1. To the transferor / service recipient entity: Provide a copy of the signed election to:
Ardent Healthcare Holdings LLC [Insert address]
Attention: [Insert appropriate contact name and/or title, e.g., General Counsel or Chief Financial Officer]
The taxpayer should deliver this copy promptly after the closing date. Delivery may be made by hand, by overnight courier, by email (in PDF format) to the designated contact at the Company, or by United States mail. The taxpayer should retain proof of delivery.
2. To the taxpayer's tax return: Attach a copy of the signed election to the taxpayer's federal income tax return (Form 1040 or Form 1040-SR, as applicable) for the taxable year in which the transfer occurred. If the taxpayer files his or her return electronically, the taxpayer should consult with his or her tax advisor regarding the appropriate method for attaching the election to an electronically filed return.
3. Retain a copy for records: The taxpayer should retain a copy of the signed election and all proof of mailing (including the certified mail receipt, the return receipt (green card), and any other delivery confirmation) for his or her permanent tax records. These records should be kept for at least the period of the applicable statute of limitations (generally three years from the date the return is filed or the due date of the return, whichever is later, but potentially longer in certain circumstances).
D. State Tax Filing
Certain states impose their own income tax requirements that may require a similar election or notification at the state level in connection with the receipt of restricted property. The requirements vary by state and may differ from the federal requirements.
The taxpayer should consult with his or her own tax advisor regarding state-level filing requirements, including but not limited to the requirements of the states of [Insert states of taxpayer's residence and/or the states in which Ardent Healthcare Holdings LLC or its subsidiaries conduct business, e.g., New York, California, Texas, etc.].
Failure to comply with applicable state filing requirements may result in adverse state income tax consequences to the taxpayer.
DISCLAIMER / PREPARATION NOTE
This form has been prepared by Calderwood & Harkness LLP for use by rollover participants receiving unvested Class B Units of Ardent Healthcare Holdings LLC in connection with the acquisition of Pinnacle Health Services Group LLC. This form is provided as a template only and does not constitute tax advice, legal advice, or a recommendation to make or refrain from making a Section 83(b) election. The tax consequences of making (or failing to make) a Section 83(b) election depend on each taxpayer's individual facts and circumstances, including the nature of the property received, the applicable vesting schedule, the fair market value of the property, the amount paid for the property, the taxpayer's other income and deductions, and applicable federal, state, and local tax law.
Each taxpayer should consult with his or her own independent tax advisor before completing or filing this election. Calderwood & Harkness LLP has not provided tax advice to any individual taxpayer in connection with the preparation of this form and assumes no responsibility or liability for the tax consequences resulting from the use of this form by any person. Calderwood & Harkness LLP represents Ardent Healthcare Holdings LLC (and not any individual rollover participant) in connection with the transactions described herein.
By using this form, each taxpayer acknowledges that (i) he or she has been advised to consult with his or her own tax advisor regarding the advisability of making a Section 83(b) election, (ii) the decision to make or not make the election is solely the taxpayer's responsibility, and (iii) Calderwood & Harkness LLP shall have no liability to the taxpayer in connection with the preparation, filing, or consequences of this election.
© 2024 Calderwood & Harkness LLP. All rights reserved. Engagement No. 1001-00006; Matter No. 1001-00006.