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Matlin & Partners Acquisition Corporation and U.S. Well Services, LLC Enter Business Combination

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Matlin & Partners Acquisition Corporation and U.S. Well Services, LLC Enter Business Combination

– Creates one of the first publicly traded oilfield service companies with all-electric hydraulic fracturing capabilities using its proprietary technology, Clean Fleet®
– Enables U.S. Well Services to expand its fleet size to 17 spreads with approximately 800,000 hydraulic horsepower
– Secures a $135 million PIPE commitment at $10.00 per share from leading institutional investors led by Crestview Partners
– Total enterprise value of $588 million or 2.6x 2019 projected adjusted EBITDA
– U.S. Well Services to be led by a strong existing and expanded management team
– Conference call scheduled for July 16, 2018 at 11:00 a.m. Eastern Time to discuss the business combination

Matlin & Partners Acquisition Corporation (NASDAQ: MPAC, MPACU, MPACW) (“MPAC”) a publicly traded special purpose acquisition company, and U.S. Well Services, LLC (“USWS”‘) a high-quality provider of hydraulic fracturing services and market leader in electric-powered fracturing, today announced entry into a merger and contribution agreement whereby USWS will combine with MPAC to become a publicly listed company with an anticipated initial total enterprise value of approximately $588 million.

Funds managed by Crestview Partners (“Crestview”) are leading a $135 million committed PIPE investment in the combined company for $10.00 per share to provide incremental equity capital to accelerate the rollout of USWS’ electric Clean Fleet® technology. Upon the completion of the business combination, MPAC will be renamed U.S. Well Services, Inc. and is expected to trade on the Nasdaq Capital Market.

USWS is a technology-oriented oilfield service company focused exclusively on hydraulic fracturing services for the oil and gas industry. USWS is one of the first companies to develop and commercially deploy electric-powered hydraulic fracturing equipment. USWS’ patented Clean Fleet® technology combines natural gas turbine generators with electric motors and existing industry equipment for hydraulic fracturing, offering numerous advantages over conventional, diesel-powered fracturing fleets.

The business combination takes public a next-generation pressure pumping company, with unique Clean Fleet® technology, a customer-centric culture and a commitment to driving safety and efficiency. The transformative growth capital provided by the transaction will advance USWS’ ability to deliver economic benefits to its customers and a path to creating significant value for its investors. The combination creates a company that is well-positioned to capitalize on market opportunities created by increasing development of shale plays, a shift to multi-well pads and rising completion intensity that is creating a need for innovative solutions that address cost, safety, environmental impact and regulatory considerations.

The business combination values USWS at 2.6x 2019 projected adjusted EBITDA, implying a discount of 32% to publicly traded peers1. Proceeds from the business combination are expected to allow USWS to build five additional Clean Fleets® and one additional conventional fleet, expanding its fleet size to 17 spreads with approximately 800,000 hydraulic horsepower. Once the business combination is completed, USWS projects a strong balance sheet with approximately $250 million of liquidity to support future growth.

“This combination with USWS represents a significant opportunity in a provider of electric-powered hydraulic fracturing services with disruptive technology and significant growth potential,” said David Matlin, Chairman and Chief Executive Officer of MPAC. “The capital being provided through this business combination will support USWS’ efforts to build on the advantages of its Clean Fleet® technology to drive growth through increased fleet deployments, while strengthening the company’s balance sheet and positioning the company for long-term success. Our confidence in the business is shared by existing stockholders and USWS management, who are rolling 100% of their equity to participate in the potential upside of the combination. We look forward to working closely with USWS’ experienced management team to drive significant value for our stockholders.”

“This transformational business combination enhances our capital position and will allow USWS to rapidly expand the number of fracturing spreads powered by Clean Fleet® technology in operation to meet customer demand and drive growth,” said Joel Broussard, Chief Executive Officer of USWS. “We are excited to partner with MPAC and Crestview, who share our commitment to investing in people, disruptive innovation and a culture of safety. I also want to thank our talented team of employees whose dedication and focus on providing top tier service quality for our customers helped to make this business combination possible. As we begin the next chapter in our history as a publicly traded company, we will remain focused on continuing to achieve industry leading performance to deliver benefits to our customers, employees, suppliers and the communities in which we operate.”

Adam Klein, a Partner at Crestview, said, “We are excited to partner with the senior leadership team at USWS, the leader in 100% electric hydraulic fracture stimulation. We believe the pressure pumping industry is at an inflection point and the market will move toward electric-powered frac fleets. USWS’ patented Clean Fleet® technology provides customers with substantial cost savings, environmental benefits and improved safety. We look forward to their expansion as we anticipate robust customer demand in the years to come.”

Strategic Benefits of USWS’ Clean Fleet® Technology

USWS’ Clean Fleet® is a proven technology with over 6,000 stages completed since 2014, making USWS a leading provider of electric-powered hydraulic fracturing services. Clean Fleet® technology is supported by a robust intellectual property portfolio. USWS has been granted or has received notice of allowance for 15 patents and has 53 additional patents pending.

We believe Clean Fleet® provides USWS with a distinct competitive advantage over traditional, conventional pressure pumping fleets as a result of the following characteristics:

  • Enhanced safety features – Clean Fleet® eliminates diesel fuel, reduces noise pressure and reduces heat emissions, making the wellsite safer for USWS employees and all personnel at the wellsite. By eliminating diesel truck deliveries, Clean Fleet® also reduces traffic in the communities in which USWS operates and limits wellsite crowding.
  • Fuel cost savings – The use of natural gas directly from the field allows Clean Fleet® to eliminate diesel fuel costs, providing significant fuel cost savings as compared to conventional diesel-powered equipment.
  • Improved operational efficiency – Electric motors offer superior stability and reliability, allowing Clean Fleet® to maximize productive time at the wellsite. This efficiency results in additional economic benefit to our customers in the form of savings by reducing the number of days onsite.
  • Reduced repair and maintenance cost – Clean Fleet® eliminates the use of diesel engines and transmissions, which require ongoing maintenance in the form of routine oil and filter changes, component replacements and eventual rebuilds. Moreover, Clean Fleet® has fewer mechanical parts that are susceptible to breakage, wear and malfunction, which reduces the time and capital that must be spent on maintaining equipment.
  • Longer equipment useful life – Natural gas-powered generators are proven, long-lived assets that have operated in harsh environments for decades. In conjunction with the turbine generators, Clean Fleet® uses electric motors, which have been in use in other heavy-duty industrial applications for decades with a demonstrated useful life in excess of conventional pressure pumping equipment.
  • Reduced noise pollution – Clean Fleet® offers a dramatic reduction in sound pressure and low frequency noise as compared to conventional fracturing fleets, which benefits the surrounding communities and improves worksite conditions for USWS employees and customers.
  • Environmental benefits – Clean Fleet® reduces up to 99% of NOx and CO emissions as compared to conventional fleets, reducing the environmental impact of hydraulic fracturing operations.

Management and Board

The combined company will be led by USWS’ current Chief Executive Officer, Joel Broussard. In addition, upon completion of the combination, the USWS management team, which will become the combined company’s management team, will be expanded with the addition of Kyle O’Neill as Chief Financial Officer. Mr. O’Neill will join USWS from TCW where he serves as a Managing Director in the Direct Lending Group. Mr. O’Neill brings more than 18 years of direct investing and capital markets experience. Matt Bernard, who currently serves as Chief Financial Officer of USWS, will become Chief Administrative Officer, and Nathan Houston will continue to serve as Chief Operating Officer.

Upon completion of the proposed business combination, the combined company’s board of directors will consist of seven members, including Mr. Broussard, as well as two members from MPAC, two members from USWS and two members from Crestview.

Business Combination Details

The proposed business combination is subject to customary closing conditions, including regulatory approvals and the approval of MPAC stockholders. The combination is expected to be completed in the fourth quarter of 2018.

Additional information about the proposed business combination and related financing transactions will be described in MPAC’s preliminary proxy statement relating to the merger, which MPAC will file with the U.S. Securities and Exchange Commission (the “SEC”). The description of the proposed business combination is only a summary and is qualified in its entirety by reference to the merger and contribution agreement, a copy of which will be filed by MPAC with the SEC as an exhibit to a Current Report on Form 8‐K.

Advisors
MPAC was advised on the business combination by Cantor Fitzgerald & Co. with Bracewell LLP as legal counsel. Piper Jaffray & Co., through its Simmons & Company International division, acted as financial advisor, and Winston & Strawn LLP acted as legal advisors to USWS. Vinson & Elkins L.L.P. acted as legal counsel to Crestview.

Forward‐Looking Statements

This news release includes “forward-looking statements” within the meaning of the “safe harbor” provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of words such as “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or other similar expressions that predict or indicate future events or trends or that are not statements of historical matters. Such forward-looking statements with respect to the benefits of the proposed business combination, the future financial performance of the combined company following the proposed business combination, changes in the market for USWS’ services, and expansion plans and opportunities, including future acquisition or additional business combinations are based on current information and expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing MPAC’s or USWS’ views as of any subsequent date, and neither MPAC nor USWS undertakes any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. You should not place undue reliance on these forward-looking statements. As a result of a number of known and unknown risks and uncertainties, actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include, but are not limited to: (1) the occurrence of any event, change or other circumstances that could give rise to the termination of the merger and contribution agreement between USWS and MPAC; (2) the outcome of any legal proceedings that may be instituted against USWS or MPAC following announcement of the proposed business combination and related transactions; (3) the inability to complete the transactions contemplated by the merger and contribution agreement between MPAC and USWS due to the failure to obtain approval of the stockholders of MPAC or satisfy other conditions to the closing of the proposed business combination; (4) the ability to obtain or maintain the listing of MPAC’s common stock on the Nasdaq Capital Market following the proposed business combination; (5) the risk that the proposed business combination disrupts the parties’ current plans and operations as a result of the announcement and consummation of the transactions described herein; (6) the ability to recognize the anticipated benefits of the proposed business combination, which may be affected by, among other things, competition and the ability of the combined business to grow and manage growth profitably; (7) costs related to the proposed business combination; (8) changes in applicable laws or regulations; (9) the possibility that USWS or MPAC may be adversely affected by other economic, business, and/or competitive factors; and (10) other risks and uncertainties indicated from time to time in the proxy statement to be filed by MPAC in connection with the proposed business combination, including those under “Risk Factors” therein, and other factors identified in MPAC’s prior and future filings with the SEC, available at www.sec.gov.

No Offer or Solicitation
This news release is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No portion of MPAC’s or USWS’ websites is incorporated by reference into or otherwise deemed to be a part of this news release.

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Lockdown 2.0 – Here’s how to be the best-looking person in the virtual room

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Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 1

By Jeff Carlson, author of The Photographer’s Guide to Luminar 4 and Take Control of Your Digital Photos

suggests “the product you’re creating is not the camera, the lens or a webcam’s clever industrial design. It’s the subject, you, which is just on e part of the entire image they see. You want that image to convey quality, not convenience.”

Technology experts at Reincubate saw an opportunity in the rise of remote-working video calls and developed the app, Camo, to improve the video quality of our webcam calls. As part of this, they consulted the digital photography expert and author, Jeff Carlson, to reveal how we can look our best online. 

It’s clear by now that COVID-19 has normalised remote working, but as part of this the importance of video calls has risen exponentially. While we’re all used to seeing the more casual sides of our colleagues (t-shirt and shorts, anyone?), poor webcam quality is slightly less forgivable.

But how can we improve how we look on video? We consulted Jeff Carlson for some top tips– here is what he had to say.

  1. Improve the picture quality of your call

The better your camera, the higher quality your webcam calls will be. Most webcams (as well as currently being hard to get hold of and expensive), are subpar. A DSLR setup will give you the best picture, but will cost $1,500+. You can also use your iPhone’s amazing camera as a webcam, using the new app from Reincubate, Camo.

Jeff’s comments “The iPhone’s camera system features dedicated coprocessors for evaluating and adjusting the image in real time. Apple has put a tremendous amount of work into its imaging software as a way to compensate for the necessarily small camera sensors. Although it all works in service of creating stills and video, you get the same benefits when using the iPhone as a webcam.”

Aidan Fitzpatrick, CEO of Reincubate explains why the team created Camo, “Earlier this year our team moved to working remotely, and in video calls everyone looked pretty bad, irrespective of whether they were on built-in Mac webcams or third-party ones. Thus began my journey to build Camo: an iPhone has one of the world’s best cameras in it, so could we make it work as a webcam? Category-leading webcams are noticeably worse than an iPhone 7. This makes sense: six weeks of Apple’s R&D spend tops Logitech’s annual gross revenue.”

  1. Place your camera at eye level

A video call will never quite be the same as a face-to-face conversation, but bringing your camera up to eye level is a good place to start. That can involve putting your laptop on a stand or pile of books, mounting a webcam to the top of your display screen, or even using a tripod to get the perfect position.

Jeff points out, “If the camera is looking down on you, you’ll appear minimized in the frame; if it’s looking up, you’re inviting people to focus on your chin, neck, or nostrils. Most important, positioning the camera off your eye level is a distraction. Look them in the eye, even if they’re miles or continents away.

Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 2

Low camera placement from a MacBook

  1. Make the most of natural lighting

Be aware of the lighting in the room and move yourself to face natural lighting if you can. Positioning the camera so any natural light is behind you takes the light away from your face, which can make it harder to see and read expressions on a call.

Jeff Carlson’s top tip: “If the light from outside is too harsh, diffuse it and create softer shadows by tacking up a white sheet or a stand-alone diffuser over the window.” 

Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 3Lockdown 2.0 – Here's how to be the best-looking person in the virtual room 4

Backlit against a window Facing natural light

  1. Use supplementary lighting like ring lights

The downside to natural lighting is that you’re at the mercy of the elements: if it’s too bright you’ll have the sun in your eyes, if it’s too dark you won’t be well lit.

Jeff recommends adding supplementary lighting if you’re looking to really enhance your video calls. After all, it looks like remote working will be carrying on for quite some time.

“The light can be just as easy as a household or inexpensive work light. Angle the light so it’s bouncing off a wall or the ceiling, depending on your work area, which, again, diffuses the light and makes it more flattering.

Or, for a little money, use a softbox or a shoot-through umbrella with daylight bulbs (5500K temperature), or if space is tight, LED panels. Larger lights are better for distributing illumination– don’t be afraid to get them in close to you. Placement depends on the look you’re going after; start by positioning one at a 45-degree angle in front and to the side of you, which lights most of your face while retaining nice shadow detail.” 

In some cases, a ring light may work best. LEDs are arranged in a circle, with space in the middle to put the camera’s lens and get direct illumination from the direction of the camera.

  1. Centre yourself in the frame

Make sure you’re getting the right angle and that you’re using the frame effectively.

“You should aim for people to see your head and part of your torso, not all the space between your hair and the ceiling. Leave a little space above your head so it’s not cut off, but not enough that someone’s eyes are going to drift there.”

  1. Be mindful of your backdrop

It’s not always easy to get the quiet space needed for video calls when working from home, but try as best you can to remove anything too distracting from your background.

“Get rid of clutter or anything that’s distracting or unprofessional, because you can bet that will be the second thing the viewers notice after they see you. (The Twitter account @RateMySkypeRoom is an amusing ongoing commentary on the environments people on television are connecting from.)”

A busy background as seen by a webcam

  1. Make the most of virtual backgrounds

If you’re really struggling with finding a background that looks professional, try using a virtual background.

Jeff suggests: “Some apps can identify your presence in the scene and create a live mask that enables you to use an entirely different image to cover the background. While it’s a fun feature, the quality of the masking is still rudimentary, even with a green screen background that makes this sort of keying more accurate.”

  1. Be aware of your audio settings

Our laptop webcams, cameras, and mobile phones all include microphones, but if it’s at all possible, use a separate microphone instead.

“That can be an inexpensive lavalier mic, a USB microphone, or a set of iPhone earbuds. You can also get wireless lavalier models if you’re moving around during a call, such as presenting at a whiteboard in the camera’s field of view.

The idea is to get the microphone closer to your mouth so it’s recording what you say, not other sounds or echoes in the room. If you type during meetings, mount the mic on an arm instead of resting it on the same surface as your keyboard.”

  1. Be wary of video app add-ons

Video apps like Zoom include a ‘Touch up your appearance’ option in the Video settings. This applies a skin-smoothing filter to your face, but more often than not, the end result looks artificially blurry instead of smooth.

“Zoom also includes settings for suppressing persistent and intermittent background noise, and echo cancellation. They’re all set to Auto by default, but you can choose how aggressive or not the feature is.”

  1. Be the best looking person in the virtual room

What’s important to remember about video calls at this point in time is that most people are new to what is, really, personal broadcasting. That means you can easily get an edge, just by adopting a few suggestions in this article. When your video and audio quality improves, people will take notice.

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Bringing finance into the 21st Century – How COVID and collaboration are catalysing digital transformation

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Bringing finance into the 21st Century – How COVID and collaboration are catalysing digital transformation 5

By Keith Phillips, CEO of TISATech

If just six or seven months ago someone had told you that in a matter of weeks people around the world would be locked down in their homes, trying to navigate modern work systems from a prehistoric laptop, bickering with family over who’s hogging the Wi-Fi, migrating online to manage all financial services digitally, all while washing their hands every five minutes in fear of a global pandemic… You’d think they had lost their mind. But this very quickly became the reality for huge swathes of the world and we’re about to go through that all over again as the UK government has asked that those who can work from home should.

Unsurprisingly, statistics show that lockdown restrictions introduced by the UK government in March, led to a sharp increase in people adopting digital services. Banks encouraged its customers to log onto online banking, as they limited (and eventually halted) services at branches. This forced many customers online as their primary means of managing personal finances for the first time.

If anyone had doubts before, the Covid-19 pandemic proved to us the importance of well-functioning, effective digital financial services platforms, for both financial institutions and the people using them.

But with this sudden mass online migration, it’s become clear that traditional banks have struggled to keep up with servicing clients virtually. Legacy banking systems have always stilted the digitisation of financial services, but the pandemic thrust this issue into the limelight. Fintech firms, which focus intently on digital and mobile services, knew it was only a matter of time before financial institutions’ reliance was to increase at an unprecedented rate.

For years, fintechs have been called upon by traditional players to find solutions to problems borne from those clunky legacy systems, like manual completion of account changes and money transfers. Now it is the demand for these services to be online coupled with the need for financial services firms to cut costs, since Covid-19 hit the economy.

Covid-19 has catalysed the urgent need to bring digital transformation to a wider pool of financial services businesses. Customers now have even higher expectations of larger institutions, demanding that they keep up with what the younger and more nimble challengers have to offer. Industry leaders realise that they must transform their businesses as soon as possible, by streamlining and digitising operations to compete and, ultimately, improve services for their customers.

The race for digital acceleration began far before the recent pandemic – in fact, following the 2008 financial crisis is likely more accurate. Since the credit crunch, there has been a wave of new fintech firms, full of young, bright techies looking to be the next big thing. Fintechs have marketed themselves hard at big conferences and expos or by hosting ‘hackathons’, trying to prove themselves as the fastest, most innovative or the most vital to the future of the industry.

However, even during this period where accelerating innovation in online financial services and legacy systems is crucial, the conditions brought about by the pandemic have not been conducive to this much-needed transformation.

The second issue, which again was clear far before the pandemic, is that fact that no matter how nimble or clever the fintechs’ solutions are, it is still hard to implement the solutions seamlessly, as the sector is highly fragmented with banks using extremely outdated systems populated with vast amounts of data.

With the significance of the pandemic becoming more and more clear, and the need for better digital products and services becoming more crucial to financial services firms and consumers by the day, the industry has finally come together to provide a solution.

The TISAtech project was launched last month by The Investing and Saving Alliance (TISA), a membership organisation in the UK with more than 200 leading financial institutions as members. TISA asked The Disruption House, a specialist benchmarking and data analytics business, to create a clearing house platform for the industry to help it more effectively integrate new financial technology. The project aims to enhance products and services while reducing friction and ultimately lowering costs which are passed on to the customers.

With nearly 4,000 fintechs from around the world participating, it will be the world’s largest marketplace dedicated to Open Finance, Savings, and Investment.

Not only will it provide a ‘matchmaking’ service between financial institutions an fintechs, it will also host a sandbox environment. Financial institutions can pose real problems with real data and the fintechs are given the space to race to the bottom – to find the most constructive, cost-effective solution.

Yes, there are other marketplaces, but they all seem to struggle to achieve a return on investment. There is a genuine need for the ‘Trivago’ of financial technology – a one stop shop, run by an independent body, which can do more than just matchmaking. It needs to go above and beyond to encompass the sandboxing, assessments, profiling of fintechs to separate the wheat from the chaff, and provide a space for true collaboration.

The pandemic has taught us that we are more effective if we work together. We need mass support and collaboration to find solutions to problems. Businesses and industries are no different. If fintechs and financial institutions can work together, there is a real chance that we can start to lessen the economic hit for many businesses and consumers by lowering costs and streamlining better services and products. And even if it is just making it that little bit easier to manage personal finances from home when fighting with your children for the Wi-Fi, we are making a difference.

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What to Know Before You Expand Across Borders

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What to Know Before You Expand Across Borders 6

By Sean King, Director of International Tax at McGuire Sponsel

The American retail giant, Target Corporation, has a market cap of $64 billion and access to seemingly limitless resources and advisors. So, when the company engaged in its first global expansion, how could anything possibly go wrong?

Less than two years after opening its first Canadian store in 2013, Target shut down all133 Canadian locations and terminated more than 17,000 Canadian employees.

Expansion of an operation to another country can create unique challenges that may impact the financial viability of the entire enterprise. If Target Corporation can colossally fail in its expansion to Canada, how might Mom ‘N’ Pop LLC fare when expanding into Switzerland, Singapore, or Australia?

Successful global expansion requires an understanding of multilayered taxes, regulatory hurdles, employment laws, and cultural nuances. Fortunately, with the right guidance, global expansion can be both possible and profitable for businesses of any size.

Permanent establishment

Any company with global ambitions must first consider whether the company’s expansion outside of the U.S. will give rise to a taxable presence in the local country. In the cross-border context, a “permanent establishment” can be created in a local country when the enterprise reaches a certain level of activity, which is problematic because it exposes the U.S. multinational to taxation in the foreign country.

Foreign entity incorporation

To avoid permanent establishment risk, many U.S. multinationals choose to operate overseas through a formal corporate subsidiary, which reduces the company’s foreign income tax exposure, though it may result in an additional level of foreign income tax on the subsidiary’s earnings. In most jurisdictions, multinationals can operate their business in the foreign country as a branch, a pass through (e.g., partnership,) or a corporation.

As a branch, the U.S. multinational does not create a subsidiary in the foreign country. It holds assets, employees, and bank accounts under its own name. With a pass through, the U.S. multinational creates a separate entity in the foreign country that is treated as a partnership under the tax law of the foreign country but not necessarily as a partnership under U.S. tax law.

U.S. multinationals can also create corporate subsidiaries in the foreign country treated as corporations under the tax law of both the foreign country and the U.S., with possibly two levels of income taxation in the foreign country plus U.S. income taxation of earnings repatriated to the U.S. as dividends.

Check-the-box planning

Under U.S. entity classification rules, certain types of entities can “check the box” to elect their classification to be taxed as a corporation with two levels of tax, a partnership with pass-through taxation, or even be disregarded for U.S. federal income tax purposes. The check the box election allows U.S. multinationals to engage in more effective global tax planning.

Toll charges, transfer pricing and treaties

When establishing a foreign corporate subsidiary, the U.S. multinational will likely need to transfer certain assets to the new entity to make it fully operational. However, in many cases, the U.S. multinational cannot perform the transfer without recognizing taxable income. In the international context, the IRS imposes certain outbound “toll charges” on the transfer of appreciated property to a foreign entity, which are usually provided for in IRC Section 367 and subject to various exceptions and nuances.

Instead, the U.S. multinational may prefer to license intellectual property to the foreign subsidiary for a fee rather than transfer the property outright. However, licensing requires the company and foreign subsidiary to adhere to transfer pricing rules, as dictated by IRC Section 482. The U.S. multinational and the foreign subsidiary must interact in an arms-length manner regarding pricing and economic terms. Furthermore, any such arrangement may attract withholding taxes when royalties are paid across a border.

Are you GILTI?

Certain U.S. multinationals opt to focus on deferring the income recognition at the U.S. level. In doing so, they simply leave overseas profits overseas and delay repatriating any of the earnings to the U.S.

Despite the general merits of this form of planning, U.S. multinationals will be subject to certain IRS anti-deferral mechanisms, commonly known as “Subpart F” and GILTI. Essentially, U.S. shareholders of certain foreign corporations are forced to recognize their pro rata share of certain types of income generated by these foreign entities at the time the income is earned instead of waiting until the foreign entity formally repatriates the income to the U.S.

The end goal

Essentially, all effective international tax planning boils down to treasury management. Effective and early tax planning can properly allow a company to better achieve its initial goal: profitability.

If global expansion is on the horizon for your company, consult a licensed professional for advice concerning your specific situation.

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Why the FemTech sector might be the sustainability saviour we have been waiting for 28 Why the FemTech sector might be the sustainability saviour we have been waiting for 29
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Why the FemTech sector might be the sustainability saviour we have been waiting for

By Kristy Chong, CEO & Founder Modibodi ® Taking single use plastics out of circulation is no easy feat, but...

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