MEMORANDUM

MEMORANDUM
PRIVILEGED & CONFIDENTIAL ATTORNEY-CLIENT PRIVILEGE / ATTORNEY WORK PRODUCT
TO: Douglas Carmichael, Partner Francesca Morano, Partner Yuki Nakamura, Associate Carlos Espinoza, Associate
FROM: Sylvia Hartwell, Partner (Tax)
DATE: August 18, 2022
RE: FATCA Compliance and Withholding Analysis — Quorum Receivables Funding 2022-1 LLC, $500,000,000 Insurance Premium Finance Asset-Backed Notes
MATTER NO.: 1025-00007
I. Executive Summary
This memorandum analyzes the application of the Foreign Account Tax Compliance Act ("FATCA") (Sections 1471 through 1474 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC")) to the proposed issuance of $500,000,000 in aggregate principal amount of asset-backed notes (the "Notes") by Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1" or the "Issuer"). The analysis addresses the classification of QRF 2022-1 under FATCA, the withholding obligations that attach to payments made to noteholders, and the documentation requirements applicable to non-U.S. holders of the Notes. This memorandum is intended to serve as the foundational FATCA analysis for purposes of preparing the transaction documents and the tax disclosure section of the Preliminary Offering Memorandum.
The proposed transaction involves a Rule 144A / Regulation S private placement of three tranches of Notes, structured as follows:
The Notes will be backed by a revolving pool of insurance premium finance receivables originated by Quorum Premium Finance LLC ("QPF"), a wholly owned subsidiary of Quorum Insurance Holdings Corp. ("QIH," NYSE: QIHC). QPF is one of the leading non-bank insurance premium finance companies in the United States, with a serviced portfolio of approximately $2.3 billion as of June 30, 2022. The receivables underlying the Notes are short-duration (typically seven to ten months), fully amortizing commercial premium finance loans secured by the unearned premiums on the underlying insurance policies.
Key Conclusions. Based on our analysis, the Notes can be structured to comply with FATCA withholding requirements, and we do not anticipate that FATCA will present a material impediment to the successful marketing and placement of the Notes. Specifically:
•  QRF 2022-1 is a domestic entity organized under the laws of the State of Delaware and is therefore not a "foreign financial institution" ("FFI") within the meaning of IRC § 1471. The FFI regime does not apply to QRF 2022-1 directly. Rather, QRF 2022-1 should be classified as a "deemed-compliant FFI" only to the extent that term is used loosely in market parlance; more precisely, QRF 2022-1 is a U.S. person and a U.S. withholding agent for FATCA purposes. Alternatively, if the entity classification analysis were to conclude that QRF 2022-1 should be treated as a foreign entity (which we do not expect, as discussed below), it would qualify under the restricted fund or owner-documented FFI safe harbors, depending on the final entity classification. We expect the domestic entity classification to control.
•  Interest payments on the Notes will constitute "withholdable payments" under IRC § 1473(1)(A), and QRF 2022-1 (through its paying agent, Calvoneth Trust Company, N.A.) will be required to withhold 30% on such payments made to non-compliant FFIs, recalcitrant account holders, and passive NFFEs that do not provide certification regarding their substantial U.S. owners.
•  Non-U.S. holders must provide appropriate W-8 documentation (W-8BEN, W-8BEN-E, or other applicable W-8 forms) to avoid FATCA withholding.
•  The transaction documents—including the Indenture, the Note Purchase Agreement, and the Offering Memorandum—should include detailed FATCA provisions addressing withholding authority, documentation requirements, the absence of any gross-up obligation, and investor disclosure.
Detailed recommendations for each transaction document and for operational compliance procedures are set forth in the sections that follow.
II. Background on FATCA
A. Legislative and Regulatory Framework
The Foreign Account Tax Compliance Act was enacted on March 18, 2010 as part of the Hiring Incentives to Restore Employment Act (the "HIRE Act"), Pub. L. No. 111-147, §§ 501–541, 124 Stat. 71, 97–117. FATCA is codified at IRC §§ 1471 through 1474 and represents one of the most significant developments in international tax enforcement in recent decades.
The statute was enacted in response to well-documented instances of offshore tax evasion facilitated by foreign financial institutions. Congress designed FATCA to create a comprehensive information reporting and withholding regime that would incentivize foreign financial institutions to identify and report information about financial accounts held by U.S. taxpayers (or by foreign entities in which U.S. taxpayers hold substantial ownership interests). The enforcement mechanism selected by Congress was a punitive withholding tax: a 30% withholding tax imposed on certain U.S.-source payments made to FFIs that do not comply with FATCA's reporting requirements and to certain non-financial foreign entities ("NFFEs") that do not provide information regarding their substantial U.S. owners.
The Treasury Department and the Internal Revenue Service have promulgated extensive implementing regulations under FATCA, set forth at Treasury Regulation §§ 1.1471-1 through 1.1474-7. These final regulations, first issued in January 2013 and subsequently amended in multiple stages, provide the detailed rules governing (i) withholding on payments to FFIs, (ii) the requirements for FFI agreements between the IRS and participating FFIs, (iii) the rules applicable to NFFEs, (iv) the definition of "withholdable payments," (v) the documentation and due diligence standards for identifying account holders, and (vi) reporting obligations.
In addition to the final regulations, the IRS has issued a substantial body of administrative guidance interpreting and implementing FATCA, including:
•  IRS Notice 2013-43 (July 29, 2013), which addressed the treatment of "grandfathered obligations" and provided guidance on obligations outstanding on or before July 1, 2014;
•  IRS Notice 2014-33 (May 2, 2014), which provided a transitional period for compliance with certain FATCA requirements;
•  IRS Notice 2015-66 (September 18, 2015), which addressed the elimination of withholding on foreign passthru payments and provided updated timelines; and
•  Various subsequent Revenue Procedures, including Rev. Proc. 2017-16, which updated the FFI Agreement.
The overarching purpose of FATCA, as articulated in the legislative history and implementing regulations, is to combat offshore tax evasion by requiring FFIs and NFFEs to report information about U.S. account holders to the IRS, or, alternatively, to face a 30% withholding tax on certain U.S.-source payments as a consequence of non-compliance. In the securitization context, FATCA's relevance arises primarily from the withholding obligations that attach to interest payments made to non-U.S. holders of the securities.
B. Intergovernmental Agreements (IGAs)
Since the enactment of FATCA, the United States has entered into over 100 intergovernmental agreements ("IGAs") with foreign jurisdictions to facilitate the implementation of FATCA. These IGAs generally follow one of two model frameworks:
•  Model 1 IGAs: Under a Model 1 IGA, FFIs in the partner jurisdiction report information about U.S. account holders to their local tax authority, which in turn exchanges that information with the IRS pursuant to the IGA and applicable tax information exchange agreements. Model 1 IGAs may be reciprocal (Model 1A) or nonreciprocal (Model 1B). Partner jurisdictions that have entered into Model 1 IGAs include the United Kingdom, France, Germany, Japan, Canada, Australia, and numerous other jurisdictions.
•  Model 2 IGAs: Under a Model 2 IGA, FFIs in the partner jurisdiction enter into FFI agreements directly with the IRS and report information about U.S. account holders directly to the IRS, subject to the consent-based framework of the IGA. Partner jurisdictions with Model 2 IGAs include Switzerland, Japan (which has both a Model 1 and a Model 2 IGA), and certain other jurisdictions.
The relevance of IGAs to the Notes offering is twofold. First, non-U.S. holders from IGA jurisdictions may have modified compliance obligations under FATCA, as FFIs in those jurisdictions may be treated as "registered deemed-compliant FFIs" or "reporting Model 1 FFIs" depending on the terms of the applicable IGA. Second, the FATCA classification that a non-U.S. holder selects on its W-8BEN-E form may depend on the IGA status of its home jurisdiction.
Given the complexity and jurisdiction-specific nature of IGA compliance, the Offering Memorandum should include a prominent statement advising prospective investors that they should consult their own tax advisors regarding the application of FATCA in light of their particular circumstances, including the IGA status (if any) of their jurisdiction of organization or residence.
C. Scope of FATCA Withholding
FATCA imposes a 30% withholding tax on "withholdable payments" made to non-compliant FFIs (i.e., FFIs that have not entered into an FFI agreement with the IRS and are not otherwise exempt or deemed-compliant) and to non-exempt NFFEs that do not provide certification regarding their substantial U.S. owners. The term "withholdable payment" is defined in IRC § 1473(1) and Treas. Reg. § 1.1473-1(a) to include:
(i) Any payment of interest (including original issue discount), dividends, rents, salaries, wages, premiums, annuities, compensations, remunerations, emoluments, and other fixed or determinable annual or periodical ("FDAP") gains, profits, and income, if such payment is from sources within the United States; and
(ii) Any gross proceeds from the sale or other disposition of any property of a type which can produce interest or dividends from sources within the United States.
With respect to clause (ii) above, the gross proceeds component of FATCA withholding was originally scheduled to take effect on January 1, 2019. However, the IRS subsequently announced that proposed regulations would be issued to eliminate the gross proceeds withholding requirement entirely, and in December 2018, the IRS released proposed regulations (REG-132881-17) that effectively removed gross proceeds from the definition of "withholdable payment" for purposes of FATCA withholding. Treasury Regulation § 1.1473-1(a)(1), as modified by the 2018 proposed regulations (which taxpayers may rely upon), provides that gross proceeds paid after December 31, 2018 are not subject to FATCA withholding. Accordingly, the gross proceeds component of FATCA withholding is not applicable to the Notes and need not be addressed further in the transaction documents, except to note its elimination in the Offering Memorandum disclosure for completeness.
As applied to the Notes, interest payments on the Notes will constitute withholdable payments to the extent they constitute U.S.-source FDAP income. As discussed in Section IV below, the interest payments on all three tranches of Notes will be U.S.-source interest income and therefore will be within the scope of FATCA withholding.
III. Classification of QRF 2022-1 Under FATCA
A. Entity Status for U.S. Federal Income Tax Purposes
QRF 2022-1 is a limited liability company organized under the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq. The sole member of QRF 2022-1 is Quorum Receivables Holding LLC ("QRH"), also a Delaware limited liability company. QRH is in turn wholly owned by QPF, a Delaware limited liability company, which is wholly owned by QIH, a Delaware corporation listed on the New York Stock Exchange under the ticker symbol QIHC. The organizational structure can be summarized as follows:
QIH (Delaware Corp., NYSE: QIHC) → QPF (Delaware LLC; wholly owned by QIH; Manager: Sandra Ling-Hwang) → QRH (Delaware LLC; sole member QPF; Independent Manager: Eleanor M. Vasquez, Fortbridge Corporate Services LLC) → QRF 2022-1 (Delaware LLC; sole member QRH)
For U.S. federal income tax purposes, QRF 2022-1 is intended to be treated as a "disregarded entity" within the meaning of Treas. Reg. § 301.7701-3(b)(1)(ii). As a domestic eligible entity with a single owner that does not elect to be classified as a corporation, QRF 2022-1 is classified as a disregarded entity by default under the check-the-box regulations. This means that QRF 2022-1 is not treated as a separate taxable entity from its owner for federal income tax purposes, and its activities are treated as the activities of its owner (QRH, which is itself disregarded, resulting in the activities being attributed up the chain to QPF and ultimately to QIH).
This intended tax treatment was analyzed in detail in the Tax Structuring Memorandum dated August 12, 2022, prepared by this office, which addressed the federal income tax classification of each entity in the securitization chain. The draft Tax Characterization Opinion (to be prepared by the undersigned) will provide a formal legal opinion regarding the disregarded entity treatment of QRF 2022-1. That opinion is expected to be delivered at or prior to the closing of the transaction.
It bears noting that while QRF 2022-1 is a disregarded entity for federal income tax purposes generally, Treas. Reg. § 1.1471-1(b)(40) provides that, for purposes of Chapter 4 of the Code (i.e., FATCA), a disregarded entity is nonetheless treated as a separate entity for certain FATCA-specific purposes, including for purposes of determining whether the entity is a U.S. or foreign entity and for purposes of the entity's status as a withholding agent. This treatment does not alter the core analysis set forth below, but it is relevant to understanding how QRF 2022-1 interacts with FATCA as a separate entity.
B. Domestic vs. Foreign Entity Classification
The threshold question under FATCA is whether QRF 2022-1 is a "domestic" entity or a "foreign" entity for U.S. federal income tax purposes. This determination is critical because FATCA's FFI regime under IRC § 1471 applies only to foreign financial institutions—that is, financial institutions that are "foreign entities" within the meaning of the Code.
Under Treasury Regulation § 301.7701-5(a), a business entity is domestic if it is created or organized in the United States or under the law of the United States or of any State. The term "State" includes any State of the United States and the District of Columbia. QRF 2022-1 is organized under the laws of the State of Delaware and is therefore, without question, a domestic entity.
As a domestic entity, QRF 2022-1 is not a "foreign financial institution" within the meaning of IRC § 1471(d)(4). FATCA's FFI regime—including the requirements to enter into an FFI agreement with the IRS, to register for a Global Intermediary Identification Number ("GIIN"), and to comply with the due diligence and reporting requirements applicable to FFIs—does not apply to QRF 2022-1 directly. QRF 2022-1 is not required to register on the IRS FFI List, and no GIIN is required for QRF 2022-1.
Instead, QRF 2022-1 is a "U.S. person" within the meaning of IRC § 7701(a)(30), and its FATCA obligations arise in its capacity as a "withholding agent" making withholdable payments to non-U.S. persons, as discussed in the following subsection.
C. QRF 2022-1 as Withholding Agent
Under Treasury Regulation § 1.1473-1(d), a "withholding agent" means any person, in whatever capacity acting, having the control, receipt, custody, disposal, or payment of a withholdable payment. The term "withholding agent" is defined broadly and encompasses any U.S. or foreign person that is in a position to make or control the making of withholdable payments.
QRF 2022-1, as the Issuer of the Notes, is the entity that is obligated under the Indenture to make interest and principal payments to noteholders. QRF 2022-1 therefore qualifies as a withholding agent for FATCA purposes with respect to the interest payments on the Notes (which, as discussed in Section IV below, constitute withholdable payments).
Additionally, Calvoneth Trust Company, N.A. ("Calvoneth Trust"), in its capacity as paying agent under the Indenture, is also a withholding agent for FATCA purposes. In practice, it is Calvoneth Trust, through its Corporate Trust Office located at 600 Travis Street, Suite 5800, Houston, Texas 77002 (Senior Trust Officer: Gerald K. Fontaine), that will have direct operational control over the payment of interest and principal to noteholders. As the entity with custody and control of the payment mechanics, Calvoneth Trust is the natural party to bear primary operational responsibility for FATCA compliance, including the collection and validation of W-8 and W-9 forms, the application of FATCA withholding when required, and the filing of applicable information returns.
Practical Recommendation. The Indenture (currently in execution draft v4, dated October 12, 2022) should include FATCA-specific provisions that expressly allocate primary FATCA withholding and reporting responsibility to Calvoneth Trust in its capacity as paying agent. These provisions should make clear that:
(a) Calvoneth Trust is authorized and directed to collect W-8 and W-9 forms from all noteholders and beneficial owners;
(b) Calvoneth Trust is authorized and directed to apply FATCA withholding at the rate of 30% on any payment of interest to a holder or beneficial owner that has not provided valid FATCA documentation;
(c) Calvoneth Trust shall report all amounts withheld under FATCA on the applicable IRS forms (Forms 1042 and 1042-S); and
(d) Calvoneth Trust shall not be liable to any holder, beneficial owner, or other person for any FATCA withholding properly applied in accordance with the Indenture and applicable law.
We recommend discussing these provisions with Gerald K. Fontaine at Calvoneth Trust to confirm that Calvoneth Trust's operational systems are capable of implementing the required FATCA compliance procedures, including the tracking of W-8 form expiration dates and the application of withholding at the individual holder level through DTC.
D. Treatment of QRH and QPF
For completeness, we briefly address the FATCA status of the other entities in the securitization chain.
Quorum Receivables Holding LLC ("QRH"). QRH is a Delaware limited liability company whose sole member is QPF. Eleanor M. Vasquez of Fortbridge Corporate Services LLC serves as the independent manager of QRH. As a domestic entity organized under the laws of Delaware, QRH is not an FFI. QRH is also a disregarded entity for federal income tax purposes (as analyzed in the August 12, 2022 Tax Structuring Memorandum). QRH does not make payments directly to noteholders; its sole function in the securitization structure is to serve as the sole member of QRF 2022-1, providing bankruptcy remoteness through the special purpose entity structure. Accordingly, FATCA withholding obligations do not fall on QRH in the transaction payment chain.
Quorum Premium Finance LLC ("QPF"). QPF is a Delaware limited liability company wholly owned by QIH. Sandra Ling-Hwang serves as Manager of QPF. QPF serves as the originator and servicer of the insurance premium finance receivables in the securitization. As a domestic entity, QPF is not an FFI. QPF's role in the transaction is to originate receivables, sell them to QRF 2022-1 pursuant to the Receivables Purchase Agreement, and service the receivables pursuant to the Servicing Agreement. QPF does not make payments directly to noteholders. The payments that QPF collects from obligors on the receivables are remitted to the collection account held at Calvoneth Trust (in its capacity as securities intermediary), from which funds are distributed to noteholders pursuant to the payment waterfall in the Indenture. FATCA withholding obligations do not fall on QPF in its capacity as originator or servicer.
In summary, the only entities in the securitization chain that bear FATCA withholding obligations with respect to payments to noteholders are QRF 2022-1 (as Issuer) and Calvoneth Trust (as paying agent), and as a practical matter, those obligations should be allocated to Calvoneth Trust through the Indenture provisions described above.
IV. Withholdable Payments Analysis
A. Interest on the Notes
Interest payments on each tranche of the Notes will constitute U.S.-source interest income. The Notes are obligations of a U.S. entity (QRF 2022-1, a domestic Delaware LLC), and interest paid on such obligations is U.S.-source income under IRC § 861(a)(1). The preliminary pricing guidance for each tranche is as follows:
•  Class A Notes (preliminary CUSIP 74892TAA3): SOFR + 125 basis points
•  Class B Notes (preliminary CUSIP 74892TAB1): SOFR + 210 basis points
•  Class C Notes (preliminary CUSIP 74892TAC9): SOFR + 375 basis points
Interest payments at these rates (or at final pricing rates, which may differ) will constitute fixed or determinable annual or periodical ("FDAP") income from sources within the United States. As such, these interest payments fall squarely within the definition of "withholdable payments" under IRC § 1473(1)(A) and Treas. Reg. § 1.1473-1(a)(1)(i).
Accordingly, to the extent interest payments are made to non-compliant FFIs, recalcitrant account holders, or passive NFFEs that have not provided the required certifications, FATCA withholding at the rate of 30% must be applied by the withholding agent (Calvoneth Trust, as paying agent).
B. Principal Payments
Payments of principal on the Notes—that is, the return of the noteholders' invested capital—are generally not FDAP income. Return of principal represents a return of the holder's investment, not income, and therefore does not constitute a "withholdable payment" subject to FATCA withholding.
As noted in Section II.C above, the gross proceeds component of FATCA withholding has been effectively eliminated under current guidance. Even if gross proceeds withholding were still in effect, it would have applied only to the disposition proceeds of property that could produce interest or dividends, not to scheduled amortization payments of principal. In any event, because gross proceeds withholding has been removed from the FATCA regime under the 2018 proposed regulations (which taxpayers may rely upon), this issue does not require further analysis. Principal payments on the Notes are not subject to FATCA withholding.
C. Payments from the Receivables Pool
The underlying cash flows that support the Notes consist of payments by obligors (U.S. commercial policyholders) on the insurance premium finance receivables in the securitized pool. These obligor payments—comprising principal, interest, and late fees on the premium finance loans—flow from the obligors to QPF (as servicer) and are deposited into the collection account held at Calvoneth Trust (in its capacity as securities intermediary under the Indenture).
These obligor payments are not directly subject to FATCA withholding at the SPV level. The obligors are U.S. commercial entities paying their contractual loan obligations to QPF as servicer of the receivables. These payments are not "withholdable payments" in the hands of the SPV because they do not represent payments by the SPV to foreign persons. Rather, FATCA withholding is triggered only at the point in the payment waterfall where the Issuer (through Calvoneth Trust as paying agent) makes distributions of interest to non-U.S. holders of the Notes.
It is worth noting that the obligors on the receivables are exclusively U.S. commercial policyholders. QPF does not originate premium finance loans to foreign obligors, and the eligibility criteria in the Receivables Purchase Agreement require that each obligor be a U.S. person. This further confirms that there are no FATCA withholding issues at the obligor payment level.
V. FATCA Withholding Obligations and Procedures
A. When Withholding Applies
FATCA requires withholding at the rate of 30% on withholdable payments (here, interest on the Notes) made to any of the following categories of payees:
1.  Non-participating FFIs. An FFI that has not entered into an FFI agreement with the IRS under IRC § 1471(b) and is not otherwise exempt from FATCA or treated as a deemed-compliant FFI. Non-participating FFIs are subject to FATCA withholding because they have not agreed to identify and report their U.S. account holders to the IRS.
2.  Recalcitrant account holders. A holder of the Notes (or a beneficial owner thereof) that fails to provide the withholding agent with the documentation required under FATCA—specifically, a valid W-8 or W-9 form, as applicable. Under Treas. Reg. § 1.1471-5(g), an account holder is treated as "recalcitrant" if the holder fails to comply with documentation requests or if the documentation provided is insufficient to determine the holder's FATCA status.
3.  Non-exempt NFFEs. A passive NFFE (i.e., a non-financial foreign entity in which more than 50% of gross income is passive income or more than 50% of assets produce passive income) that does not provide certification regarding its "substantial U.S. owners" (i.e., U.S. persons who own, directly or indirectly, more than 10% of the entity). Under IRC § 1472, a withholding agent must withhold 30% on withholdable payments to a passive NFFE unless the NFFE either certifies that it has no substantial U.S. owners or provides the name, address, and taxpayer identification number of each substantial U.S. owner.
In practice, the most common scenario in which FATCA withholding will be triggered is the failure of a non-U.S. noteholder to provide a valid W-8BEN-E form (for entity holders) or W-8BEN form (for individual holders) with the required FATCA certifications. The paying agent's procedures should be designed to identify and flag such deficiencies promptly.
B. Exemptions from Withholding
FATCA withholding does not apply to withholdable payments made to the following categories of payees:
1.  U.S. persons. Payments to holders that are U.S. persons (as certified on Form W-9) are not subject to FATCA withholding. U.S. persons are, however, subject to the standard backup withholding rules under IRC § 3406 if they fail to provide a taxpayer identification number ("TIN"). Given that the Notes will be offered primarily to U.S. qualified institutional buyers under Rule 144A, the majority of holders are expected to be U.S. persons.
2.  Participating FFIs and deemed-compliant FFIs. Payments to FFIs that have entered into an FFI agreement with the IRS (participating FFIs) or that qualify as "deemed-compliant FFIs" under Treas. Reg. § 1.1471-5(f) are exempt from FATCA withholding, provided the FFI has furnished a valid W-8BEN-E form to the withholding agent identifying its FATCA status and, if applicable, providing its GIIN.
3.  Exempt beneficial owners. Payments to certain categories of exempt beneficial owners are not subject to FATCA withholding. These include foreign governments (as defined in IRC § 892), international organizations, foreign central banks of issue, governments of U.S. territories, and certain retirement funds. The exemption must be documented on a W-8BEN-E or W-8EXP form, as applicable.
4.  Active NFFEs and excepted NFFEs. Payments to NFFEs that qualify as "active NFFEs" (i.e., less than 50% of gross income and assets are passive) or "excepted NFFEs" (e.g., publicly traded corporations, affiliates of publicly traded corporations, certain territory entities, and certain nonprofit organizations) are not subject to FATCA withholding.
5.  Passive NFFEs that provide owner certification. Payments to passive NFFEs that certify on a W-8BEN-E that they have no substantial U.S. owners, or that identify each substantial U.S. owner, are exempt from FATCA withholding. The withholding agent must report the identity of any substantial U.S. owners to the IRS on the applicable information returns.
6.  Entities in IGA partner jurisdictions. FFIs and NFFEs organized in jurisdictions that have entered into an IGA with the United States may be treated as compliant with FATCA under the terms of the applicable IGA, provided they comply with the IGA's reporting requirements. The specific treatment depends on whether the entity is in a Model 1 or Model 2 IGA jurisdiction and whether it has registered as required.
C. Operational Procedures for the Issuer and Paying Agent
In light of the foregoing analysis, Calvoneth Trust, as paying agent under the Indenture, should implement the following FATCA compliance procedures:
1.  Collection of W-8 and W-9 Forms. Calvoneth Trust should obtain a completed and signed IRS Form W-8 (the applicable version depending on the holder's status, as discussed in Section VI below) or Form W-9 from each noteholder at or before the time of purchase of the Notes. For Notes held through DTC in global form, Calvoneth Trust should coordinate with DTC and its participants to ensure that W-8 or W-9 forms are obtained from beneficial owners.
2.  Validation of Documentation. Calvoneth Trust should validate the documentation received from each holder under the applicable due diligence standards set forth in Treas. Reg. §§ 1.1471-3 and 1.1471-4. This includes reviewing each W-8 form for completeness, internal consistency, and consistency with other account information, and verifying GIINs against the IRS FFI List (published and updated periodically by the IRS at https://apps.irs.gov/app/fatcaFfiList).
3.  Application of Withholding. Calvoneth Trust should apply withholding at the rate of 30% on any payment of interest on the Notes to a holder or beneficial owner that (a) has not provided a valid W-8 or W-9 form, (b) has provided a W-8 form that indicates the holder is a non-participating FFI, (c) has provided a W-8BEN-E indicating that the holder is a passive NFFE without the required substantial U.S. owner certification, or (d) is otherwise identified as a recalcitrant account holder or non-compliant payee.
4.  Reporting of Withheld Amounts. Calvoneth Trust should report all amounts withheld under FATCA on the applicable IRS information returns. Specifically, Calvoneth Trust should file an annual Form 1042 (Annual Withholding Tax Return for U.S. Source Income of Foreign Persons) and issue a Form 1042-S to each non-U.S. recipient of withholdable payments, as discussed further in Section XI below.
5.  Record Retention. Calvoneth Trust should maintain records of all W-8 and W-9 forms received, all withholding calculations, and all FATCA-related correspondence for the period prescribed by applicable law—generally, at least three years from the date of the last return filed or the date the last payment is made, whichever is later.
We recommend that these operational procedures be documented in a FATCA compliance addendum to the Paying Agency Agreement between QRF 2022-1 and Calvoneth Trust, and that the procedures be reviewed and approved by Gerald K. Fontaine at Calvoneth Trust prior to the closing of the transaction.
VI. W-8 Documentation Requirements for Non-U.S. Holders
A. Applicable Forms
Non-U.S. holders of the Notes will be required to provide the appropriate IRS Form W-8 to the withholding agent in order to establish their FATCA status and, where applicable, to claim an exemption from FATCA withholding. The following W-8 forms are relevant:
W-8BEN (Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting — Individuals). This form is used by individual non-U.S. beneficial owners to (i) establish their foreign status, (ii) claim the benefit of an applicable income tax treaty for purposes of reducing or eliminating Chapter 3 withholding (IRC §§ 1441–1443), and (iii) certify their FATCA status. While we do not expect that individual investors will constitute a significant portion of the investor base for the Notes (given the Rule 144A / Reg S format and the institutional nature of the asset class), the paying agent's procedures should accommodate W-8BEN forms from individual holders.
W-8BEN-E (Certificate of Status of Beneficial Owner for United States Tax Withholding and Reporting — Entities). This is the primary form that will be used by entity non-U.S. holders of the Notes. Form W-8BEN-E requires the entity to identify its FATCA classification from among approximately 30 categories, including participating FFI, reporting Model 1 FFI, reporting Model 2 FFI, registered deemed-compliant FFI, certified deemed-compliant FFI, nonparticipating FFI, exempt beneficial owner (with subcategories for foreign governments, international organizations, foreign central banks, and retirement funds), active NFFE, passive NFFE, excepted NFFE, and others. The form also requires, where applicable, the entity's GIIN, the name of its sponsoring entity (if applicable), and certification regarding substantial U.S. owners (for passive NFFEs). The W-8BEN-E is the most critical document from a FATCA compliance perspective, and the paying agent should ensure that each entity holder completes the FATCA-specific portions of the form (Part I, Lines 4–5, and the applicable chapter 4 status certifications in Parts IV through XXVIII) accurately and completely.
W-8IMY (Certificate of Foreign Intermediary, Foreign Flow-Through Entity, or Certain U.S. Branches for United States Tax Withholding and Reporting). This form is used by intermediaries (including qualified intermediaries and nonqualified intermediaries), flow-through entities (such as foreign partnerships and foreign simple trusts), and certain U.S. branches of foreign persons acting in an intermediary capacity. In the context of the Notes offering, W-8IMY may be relevant if Notes are held through foreign intermediaries or if beneficial ownership is held through foreign partnership structures. A W-8IMY must be accompanied by a withholding statement and the underlying beneficial owner documentation (W-8BEN, W-8BEN-E, or W-9) for each beneficial owner to which the intermediary allocates payments.
W-8ECI (Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States). This form is used by non-U.S. persons that claim that the income received is effectively connected with the conduct of a U.S. trade or business. If a non-U.S. holder of the Notes were engaged in a U.S. trade or business to which the interest income was effectively connected, it would provide a W-8ECI to establish that the income is subject to net-basis taxation under IRC § 871(b) or § 882 rather than FATCA or Chapter 3 gross-basis withholding. We do not expect this to be a common scenario for holders of the Notes.
W-8EXP (Certificate of Foreign Government or Other Foreign Organization for United States Tax Withholding and Reporting). This form is used by foreign governments, international organizations (as described in IRC § 892(a)(3)), foreign central banks of issue, foreign tax-exempt organizations, and foreign private foundations. Holders that qualify as exempt beneficial owners under FATCA would use this form to document their exempt status.
B. Validity and Renewal
W-8 forms are generally valid for a period of three calendar years from the date of signing, subject to the general rule that a change in circumstances that makes any information on the form incorrect triggers an obligation to provide an updated form within 30 days. Specifically, under Treas. Reg. § 1.1471-3(c)(6)(ii), a withholding certificate is valid from the date it is signed until the last day of the third succeeding calendar year, unless a change in circumstances occurs prior to that date.
For purposes of the Notes, this validity period has practical significance. The Notes have a legal final maturity of 42 months from the closing date. Assuming a closing date in late 2022 or early 2023, the legal final maturity would fall in mid-2026 or mid-2027. Given the three-year validity period for W-8 forms, at least one renewal cycle will occur during the life of the Notes. For example, a W-8BEN-E signed on the closing date in December 2022 would expire on December 31, 2025, approximately six months before the legal final maturity date.
Accordingly, the Indenture and the Note Purchase Agreement should require holders to provide updated W-8 forms upon the expiration of a previously submitted form or upon the occurrence of a change in circumstances that makes any information on the form incorrect. The Indenture should further provide that a holder that fails to provide a timely updated W-8 form will be treated as a recalcitrant account holder, and FATCA withholding at 30% will be applied to any interest payments made to such holder until a valid replacement form is received.
We recommend that Calvoneth Trust implement a tracking system to monitor the expiration dates of all W-8 forms on file and to send advance notices to holders (or their DTC participants) at least 60 days prior to the expiration of their W-8 forms, requesting that updated forms be submitted before the expiration date.
C. GIIN Requirements
FFIs that have entered into an FFI agreement with the IRS (participating FFIs) and FFIs that have registered with the IRS as "registered deemed-compliant FFIs" are assigned a GIIN by the IRS. The GIIN is a 19-character identification number that uniquely identifies the FFI in the IRS's FATCA registration system.
A participating FFI or registered deemed-compliant FFI must provide its GIIN on Line 9 of Form W-8BEN-E. The paying agent should verify the validity of each GIIN provided against the IRS FFI List, which is a publicly available, searchable database maintained by the IRS that is updated on a monthly basis. If a GIIN provided on a W-8BEN-E cannot be verified on the IRS FFI List, the paying agent should contact the holder to request clarification and, if the GIIN cannot be verified within a reasonable period, should treat the holder as a non-participating FFI and apply FATCA withholding.
It should be noted that certain categories of FFIs—specifically, "certified deemed-compliant FFIs" (as opposed to "registered deemed-compliant FFIs")—are not required to register with the IRS or obtain a GIIN. These include certain local FFIs, nonregistering local banks, FFIs with only low-value accounts, certain sponsored investment vehicles, and certain owner-documented FFIs. A certified deemed-compliant FFI will indicate its status on the W-8BEN-E without providing a GIIN.
D. Penalties for Non-Compliance
The consequence of a holder's failure to provide valid W-8 documentation is straightforward: the holder will be treated as a recalcitrant account holder, and FATCA withholding at the rate of 30% will be applied to all interest payments made to such holder. The withheld amounts are remitted to the IRS by the withholding agent and are credited against the holder's U.S. tax liability, if any. A holder that is not otherwise subject to U.S. tax may file a claim for refund with the IRS to recover amounts withheld under FATCA, but this process can be time-consuming and burdensome.
From the perspective of the transaction documents, the Offering Memorandum and the Note Purchase Agreement should contain clear and prominent disclosure that:
(a) Holders and beneficial owners of the Notes are required to provide valid FATCA documentation (W-8 or W-9 forms, as applicable) to the paying agent;
(b) Failure to provide valid FATCA documentation will result in FATCA withholding at the rate of 30% on interest payments;
(c) Neither the Issuer, the Trustee, nor the paying agent is obligated to pay any additional amounts or to "gross up" payments to compensate holders for amounts withheld under FATCA; and
(d) Any amounts withheld under FATCA will be treated as amounts paid to the holder for all purposes of the Indenture, including for purposes of determining whether the Issuer has satisfied its payment obligations.
These provisions are consistent with market practice for asset-backed securities and are essential to protect the structural integrity of the securitization cash flows, as discussed further in Section VIII below.
VII. Offering Structure Considerations — Rule 144A / Regulation S
A. Rule 144A Placement (Domestic)
The Notes will be offered in the United States to qualified institutional buyers ("QIBs") as defined in Rule 144A under the Securities Act of 1933, as amended. Rule 144A purchasers will primarily be U.S. institutional investors—including insurance companies, asset managers, banks, pension funds, and other large institutional accounts. These U.S. purchasers will provide Form W-9 to certify their U.S. person status and provide their taxpayer identification numbers. Payments to U.S. persons who have provided valid W-9 forms are not subject to FATCA withholding.
We note that standard backup withholding rules under IRC § 3406 may apply to U.S. persons that fail to provide a valid TIN on their W-9 forms. Backup withholding is currently imposed at a rate of 24%. The Indenture and Offering Memorandum should address backup withholding in addition to FATCA withholding, though backup withholding and FATCA withholding are separate regimes with different triggers and documentation requirements.
If any Rule 144A purchaser is a non-U.S. entity (for example, a U.S. branch of a foreign bank that is a QIB), a W-8BEN-E (or W-8IMY, if acting in an intermediary capacity) will be required rather than a W-9. The paying agent should not assume that all Rule 144A purchasers are U.S. persons; the documentation procedures should require the paying agent to review each form received and determine the appropriate withholding treatment based on the holder's status as indicated on the W-8 or W-9.
B. Regulation S Placement (Offshore)
Notes sold under Regulation S promulgated under the Securities Act will be offered and sold to non-U.S. investors in offshore transactions. Each Regulation S purchaser will be required to provide a W-8 form (W-8BEN, W-8BEN-E, W-8IMY, W-8ECI, or W-8EXP, as applicable) to the paying agent to establish its foreign status and FATCA classification.
The placement agreement with Ridgeline Capital Markets LLC ("Ridgeline"; Ridgeline Deal ID: RCM-IPF-2022-0041; deal team contacts: Julian Weatherstone and Rebecca Tran) should include FATCA-related representations and covenants. Specifically, Ridgeline, as the initial purchaser and sole placement agent, should represent and covenant that:
(a) It will obtain FATCA documentation from each purchaser of Notes in the Regulation S offering, or will itself provide a W-8BEN-E or W-9, as applicable, to the paying agent;
(b) It will not sell Notes to any person that it knows or has reason to know is a non-participating FFI or a recalcitrant account holder, unless Ridgeline has determined that the purchaser has provided or will provide valid FATCA documentation to the paying agent; and
(c) It will cooperate with the paying agent and the Issuer in connection with any FATCA compliance matters arising from the Regulation S placement, including by facilitating the collection of W-8 forms from Regulation S purchasers.
An additional consideration arises with respect to beneficial interests in global notes held through Stonefield Industries ("Thackeray Partners LLC") or Harborview Industries ("Ashgrove Enterprises"), the European clearing systems through which Regulation S notes are typically held and transferred. When Notes are held in global form through these clearing systems, the paying agent does not have a direct relationship with the beneficial owners; rather, payments flow from the paying agent to DTC, from DTC to Thackeray Partners LLC or Ashgrove Enterprises (as participants of DTC), and from Thackeray Partners LLC or Ashgrove Enterprises to their respective participants and ultimately to the beneficial owners.
This intermediated holding structure presents challenges for FATCA documentation because the paying agent may not be able to obtain W-8 forms directly from each beneficial owner. Instead, Thackeray Partners LLC and Ashgrove Enterprises, as intermediaries, would provide W-8IMY forms to the paying agent, together with withholding statements and allocations, and the applicable FATCA withholding would be applied at the intermediary level. The paying agent should coordinate with Thackeray Partners LLC and Ashgrove Enterprises (and their respective FATCA compliance teams) to ensure that the clearing systems' FATCA documentation procedures are adequate and that the paying agent receives sufficient information to apply the correct withholding treatment to each payment.
We note that both Thackeray Partners LLC and Ashgrove Enterprises are participating FFIs with valid GIINs and have established FATCA compliance programs. However, the operational details of the information exchange between the paying agent and the clearing systems should be confirmed with Calvoneth Trust prior to closing.
C. Coordination with Calloway & Brandt LLP
Calloway & Brandt LLP serves as counsel to Ridgeline Capital Markets LLC in connection with this transaction. The principal contacts at Calloway & Brandt for this transaction are Harrison Collier, Partner, and Megan O'Shaughnessy, Senior Associate, both located at the firm's New York office at One Liberty Plaza, 165 Broadway, New York, New York 10006.
We should coordinate with Harrison Collier and Megan O'Shaughnessy to ensure that the FATCA provisions in the Note Purchase Agreement are consistent with Ridgeline's placement obligations and with the FATCA provisions in the Indenture. In particular, the following should be confirmed:
(a) The FATCA representations and covenants of Ridgeline in the Note Purchase Agreement are consistent with the paying agent's FATCA compliance procedures as set forth in the Indenture;
(b) The Regulation S purchaser certification form attached to the Note Purchase Agreement includes appropriate FATCA certifications; and
(c) The FATCA disclosure in the Offering Memorandum has been reviewed and approved by underwriter's counsel for accuracy and sufficiency.
We recommend scheduling a call with Harrison Collier and Megan O'Shaughnessy to discuss these coordination matters at the earliest opportunity.
VIII. No Gross-Up Obligation
Consistent with prevailing market practice for asset-backed securities, the Notes should not carry a gross-up or additional amounts obligation. A "gross-up" provision would obligate the Issuer to increase the amount of each payment to non-U.S. holders to compensate them for any amounts withheld under FATCA, such that the holder receives the same net amount as it would have received absent the withholding. Such provisions are common in corporate debt offerings and sovereign bond issuances, but they are generally not included in asset-backed securities for sound structural reasons.
The Indenture should expressly provide that QRF 2022-1 is not obligated to pay any additional amounts in respect of any withholding or deduction imposed under FATCA (or, for that matter, under Chapter 3 of the Code or any other applicable tax law). This "no gross-up" provision should be drafted broadly to cover all forms of withholding and should apply to all tranches of the Notes.
The inclusion of a no gross-up provision is critical in the securitization context because the cash flows available to service the Notes are finite. The sole source of funds for the Issuer is the collection of payments on the receivables pool, subject to the deduction of the servicing fee (1.00% per annum on the outstanding pool balance) and other transaction expenses. These cash flows are distributed pursuant to the sequential payment waterfall set forth in the Indenture, which provides for the payment of transaction expenses, interest on the Class A Notes, principal on the Class A Notes, interest on the Class B Notes, principal on the Class B Notes, interest on the Class C Notes, principal on the Class C Notes, and residual cash flows to the equity holder, in that order of priority.
Any gross-up obligation would constitute an additional claim on the cash flows of the securitization, potentially diverting funds from the payment waterfall and impairing the credit enhancement levels that support each tranche of Notes. The credit enhancement levels for the three tranches are as follows:
These credit enhancement levels have been sized by the rating agencies (and reviewed by the structuring team) based on the assumption that the Issuer has no obligation to make payments in excess of the amounts generated by the receivables pool, net of transaction expenses. A gross-up obligation would introduce an additional, uncapped liability that could erode credit enhancement and potentially jeopardize the expected ratings on the Notes. Accordingly, the absence of a gross-up obligation is not merely a matter of market convention but is a structural necessity for the securitization.
The no gross-up provision should be prominently disclosed in both the Indenture and the Offering Memorandum. The tax section of the Offering Memorandum should include a clear statement to the effect that:
"Neither the Issuer, the Trustee, nor the Paying Agent will be obligated to pay any additional amounts to holders or beneficial owners of the Notes in respect of any withholding or deduction imposed on payments under the Notes, including any withholding or deduction imposed under FATCA. Any amounts so withheld will be treated as having been paid to the holder for all purposes of the Indenture."
IX. Interaction with Chapter 3 Withholding and Tax Treaties
A. Chapter 3 Withholding (IRC §§ 1441–1443)
Interest payments on the Notes to non-U.S. persons are also potentially subject to withholding under Chapter 3 of the Code (IRC §§ 1441–1443). Chapter 3 imposes a 30% withholding tax on U.S.-source FDAP income paid to non-resident alien individuals (under IRC § 1441) and foreign corporations (under IRC § 1442), subject to reduction under applicable income tax treaties.
However, interest payments on the Notes should qualify for the "portfolio interest exemption" under IRC § 871(h) (for non-resident alien individuals) and IRC § 881(c) (for foreign corporations). The portfolio interest exemption eliminates Chapter 3 withholding on interest paid on obligations that satisfy certain conditions. Specifically, the exemption applies to interest on an obligation if:
(i) The obligation is in registered form. Under IRC § 871(h)(2)(B), the portfolio interest exemption is available only with respect to interest on an obligation that is in "registered form" within the meaning of IRC § 163(f). The Notes will be issued in registered form (via global notes registered in the name of Cede & Co., as nominee of DTC), and transfers of beneficial interests will be recorded through the book-entry system maintained by DTC and its participants. This satisfies the registration requirement.
(ii) The beneficial owner is not a "10-percent shareholder" of the obligor. Under IRC § 871(h)(3), the portfolio interest exemption does not apply to interest received by a 10-percent shareholder of the obligor. A "10-percent shareholder" is defined as a person who owns 10% or more of the total combined voting power of all classes of stock of the obligor (in the case of a corporate obligor) or 10% or more of the capital or profits interest in the obligor (in the case of a partnership). Given that QRF 2022-1 is a single-member LLC wholly owned by QRH (and ultimately by QIH), and the Notes do not convey any equity interest in QRF 2022-1, a holder of the Notes will not be a 10-percent shareholder of the Issuer by reason of holding the Notes.
(iii) The beneficial owner is not a controlled foreign corporation ("CFC") related to the obligor. Under IRC § 881(c)(3)(C), the portfolio interest exemption does not apply to interest received by a CFC that is related to the obligor within the meaning of IRC § 864(d)(4). We do not expect any holder of the Notes to be a CFC related to QRF 2022-1 or QIH, but the Offering Memorandum disclosure should note this limitation.
(iv) The beneficial owner is not a bank receiving interest on an extension of credit pursuant to a loan agreement entered into in the ordinary course of its trade or business. Under IRC § 881(c)(3)(A), the portfolio interest exemption does not apply to interest received by a bank on an extension of credit made pursuant to a loan agreement entered into in the ordinary course of the bank's trade or business. The Notes are not loan agreements; they are securities issued in a capital markets transaction. Accordingly, this exclusion should not apply to interest on the Notes, even if the holder is a bank. However, we note that there is some case law and IRS guidance suggesting that the bank exclusion may apply to certain bank-held securities under narrow circumstances, and the Offering Memorandum should include appropriate cautionary language on this point.
(v) The holder provides a valid W-8BEN or W-8BEN-E to the withholding agent. Under IRC § 871(h)(5) and Treas. Reg. § 1.871-14(c), the portfolio interest exemption is available only if the beneficial owner provides a statement (on a Form W-8BEN or W-8BEN-E, as applicable) certifying that the beneficial owner is not a United States person. This requirement overlaps with the FATCA documentation requirement discussed in Section VI above.
Given that the Notes will be issued in registered form through DTC and will satisfy the foregoing conditions, we expect that interest payments on the Notes will qualify for the portfolio interest exemption under IRC § 871(h) and § 881(c), thereby eliminating Chapter 3 withholding for most non-U.S. holders. The Offering Memorandum tax section should include a discussion of the portfolio interest exemption and its limitations.
B. FATCA and Chapter 3 Interaction
It is essential to understand that FATCA withholding (Chapter 4 withholding) operates independently of Chapter 3 withholding. The two regimes have different purposes, different triggers, and different documentation requirements. A non-U.S. holder may be fully exempt from Chapter 3 withholding—for example, because the holder qualifies for the portfolio interest exemption—but still subject to FATCA withholding if the holder has not provided valid FATCA documentation.
Conversely, a holder that has provided valid FATCA documentation and is exempt from FATCA withholding may nonetheless be subject to Chapter 3 withholding if the holder does not qualify for the portfolio interest exemption or a treaty-based reduction.
The practical implication of this dual-regime structure is that a non-U.S. holder must satisfy both Chapter 3 and FATCA documentation requirements to avoid withholding entirely. In most cases, a single W-8BEN or W-8BEN-E form will satisfy both requirements, as these forms include both Chapter 3 certifications (including treaty benefit claims) and Chapter 4/FATCA certifications (including FATCA status and GIIN, where applicable). However, the paying agent must apply both withholding analyses independently to each payment.
To avoid investor confusion, the Offering Memorandum tax section should clearly distinguish between Chapter 3 withholding and FATCA withholding, explaining that:
(a) Chapter 3 withholding applies to U.S.-source FDAP income paid to non-U.S. persons and may be reduced or eliminated under the portfolio interest exemption or an applicable income tax treaty;
(b) FATCA withholding applies independently and may apply even if Chapter 3 withholding does not; and
(c) Holders should provide complete and accurate W-8 documentation to avoid both Chapter 3 and FATCA withholding.
A coordinated discussion of both withholding regimes in the Offering Memorandum will be prepared as part of the Tax Disclosure Review memorandum anticipated for September 20, 2022.
X. Recommendations for Transaction Documents
A. Indenture Provisions
The Indenture (currently in execution draft v4, dated October 12, 2022) should include a standalone FATCA section—we suggest designating it as Section 3.12 (Tax Compliance — FATCA) or incorporating it into the existing tax provisions—providing for the following:
(a) Withholding Authority. The Indenture should expressly authorize the Trustee and the paying agent (Calvoneth Trust) to withhold on any payment of interest on the Notes to the extent required under FATCA, including the authority to withhold 30% on payments to non-participating FFIs, recalcitrant account holders, and passive NFFEs that have not provided the required certifications.
(b) No Gross-Up Obligation. The Indenture should expressly provide that the Issuer is not obligated to pay any additional amounts in respect of any FATCA withholding. This provision should be drafted as an absolute limitation, without exceptions or carve-outs.
(c) Documentation Requirement. The Indenture should require each holder and beneficial owner of the Notes to provide the applicable FATCA documentation (W-8 or W-9 forms) to the paying agent upon acquisition of the Notes and to update such documentation upon expiration or change of circumstances. The Indenture should further provide that the paying agent may rely on the most recently received W-8 or W-9 form in determining the appropriate withholding treatment, absent actual knowledge that the form is incorrect.
(d) Deemed Payment. The Indenture should provide that any amounts withheld under FATCA shall be treated as amounts paid to the holder for all purposes of the Indenture, including for purposes of determining whether the Issuer has satisfied its obligations to make payments on the Notes. This provision is essential to prevent a holder from claiming that the Issuer has defaulted on its payment obligations merely because FATCA withholding was applied to the holder's payment.
(e) Forced Transfer or Redemption. The Indenture may include a provision authorizing the Issuer to require the transfer or redemption of Notes held by a holder that is or becomes a non-compliant person under FATCA, if the Issuer determines that the continued holding of the Notes by such person would cause the Issuer to incur FATCA-related costs or liabilities. This is an optional provision that is included in some securitization indentures and not others. We recommend discussing with QIH General Counsel Nolan Whitford and Treasurer Sandra Ling-Hwang whether this provision is commercially desirable, taking into account the potential impact on marketability of the Notes and the administrative burden of enforcing such a provision.
B. Note Purchase Agreement Provisions
The Note Purchase Agreement between QRF 2022-1 and Ridgeline Capital Markets LLC should include the following FATCA-related provisions:
(a) FATCA Representations by Ridgeline. Ridgeline, as the initial purchaser and sole placement agent, should represent and warrant that it will obtain FATCA documentation (W-8BEN-E or W-9, as applicable) from each purchaser of the Notes, or that it will itself provide a valid W-8BEN-E or W-9 to the paying agent in its own capacity.
(b) FATCA Compliance Covenant. Ridgeline should covenant that it will cooperate with the Issuer and the paying agent in connection with FATCA compliance matters, including by facilitating the collection of W-8 forms from Regulation S purchasers.
(c) FATCA Indemnification. The Note Purchase Agreement should include an indemnification provision under which Ridgeline indemnifies the Issuer and the paying agent against any liability, cost, or expense arising from Ridgeline's failure to obtain or deliver FATCA documentation from purchasers in accordance with its obligations under the Note Purchase Agreement.
The placement fee structure—0.30% on Class A Notes ($1,125,000), 0.45% on Class B Notes ($337,500), and 0.60% on Class C Notes ($210,000), totaling $1,672,500—does not require adjustment for FATCA purposes. Placement fees are not withholdable payme