WASTE SERVICES, INC. - WSII Securities Registration Statement (simplified form) (S-3) INCOME TAX CONSIDERATIONS

The following is an excerpt from a S-3 SEC Filing, filed by WASTE SERVICES, INC. on 6/24/2004.

Jump to :

INCOME TAX CONSIDERATIONS

Canadian Federal Income Tax Considerations

In the opinion of Blake, Cassels & Graydon LLP, our Canadian counsel, the following is an accurate summary of the principal Canadian federal income tax considerations under the Income Tax Act (Canada) generally applicable to you if acquire shares of Waste Services common stock on the exercise of a warrant or on the exchange of exchangeable shares and if, for purposes of the Income Tax Act (Canada), you are or are deemed to be resident in Canada at all relevant times, you deal with us at arm's length, you are not affiliated with us and you hold your exchangeable shares or warrants and will hold the shares of Waste Services common stock as capital property.

This discussion does not apply to you if you are a "financial institution," as defined in the Income Tax Act (Canada), and are therefore subject to the mark-to-market rules of the Income Tax Act (Canada). This summary also does not apply to you if Waste Services is or will be your "foreign affiliate" for purposes of the Income Tax Act (Canada).

The exchangeable shares, warrants and shares of Waste Services common stock will generally be considered to be capital property to you unless the securities are held by you as part of a business of buying and selling securities or the securities are acquired in a transaction considered to be an adventure in the nature of trade. If you do not hold your exchangeable shares or warrants or will not hold common stock as capital property, you should consult your own tax advisors for information and advice having regard to your particular circumstances.

This summary is based on the current provisions of the Income Tax Act (Canada) and the regulations thereunder, the administrative and assessing policies and practices published by the Canada Revenue Agency, or the CRA, prior to today and specific proposals to amend the Income Tax Act (Canada) and regulations thereunder publicly announced by or on behalf of the Canadian Minister of Finance prior to today (referred to as the "tax proposals"). No assurances can be given that the tax proposals will be enacted in the form announced or at all. This summary does not take into account or anticipate any changes in law or administrative and assessing policies and practices, other than the tax proposals, nor does it take into account provincial or territorial taxes or taxes of countries other than Canada. No advance tax ruling from the CRA has been sought or obtained in respect of the migration transaction and accordingly no assurances can be given that the CRA will not assert a position contrary to one or more positions reflected in the summary below.

For purposes of the Income Tax Act (Canada), all amounts relating to the acquisition, holding or disposition of shares of Waste Services common stock must be expressed in Canadian dollars. Amounts denominated in U.S. dollars must be converted into Canadian dollars based on the U.S. dollar exchange rate generally prevailing at the time such amounts arise.

This summary is of a general nature only and is not intended to be, and should not be construed to be, legal, business or tax advice to you. Therefore, you should consult your own tax advisors with respect to your particular circumstances.

Receipt of Waste Services common stock upon an exchange of Exchangeable Shares

No gain or loss will be realized by you upon the exercise of a warrant. When a warrant is exercised, your cost of the shares of Waste Services common stock acquired by you will be equal to the aggregate of your adjusted cost base of the warrant and the exercise price paid pursuant to the warrant. In determining your adjusted cost base of the shares of Waste Services common stock held by you at such time, such cost must be averaged with the adjusted cost base of any other shares of Waste Services common stock held by you at that time as capital property for the purposes of determining the adjusted cost base of your Waste Services common stock.

Table of Contents

Receipt of Waste Services common stock upon an exchange of Exchangeable Shares

The tax treatment of amounts received on an exchange of exchangeable shares depends on whether they are disposed of to Capital Environmental or another person. On a disposition of exchangeable shares to Capital Environmental (that is, on a redemption of those shares), a Canadian resident will generally be considered to:

• realize a deemed dividend equal to the amount by which the proceeds of disposition received from Capital Environmental (that is, the fair market value at the time of disposition of the shares of Waste Services common stock received plus any amount received in respect of unpaid dividends) exceed the "paid-up capital," as defined in the Income Tax Act (Canada), of those exchangeable shares at that time;

• realize a capital gain (or capital loss), equal to the amount by which the proceeds of disposition described above, less the deemed dividend described above, exceed (or are less than) the sum of: (1) the Canadian resident's "adjusted cost base," as defined in the Income Tax Act (Canada), of those exchangeable shares determined immediately before the disposition, and
(2) any reasonable costs of disposition; and

• acquire those shares of Waste Services common stock at a cost equal to their fair market value at that time (which cost is averaged with the adjusted cost base of any other shares of Waste Services common stock held by the Canadian resident as capital property at that time for the purposes of determining the holder's adjusted cost base of such shares of Waste Services common stock).

For a description of the tax treatment of deemed dividends, see "Deemed Dividends on Exchangeable Shares". In the case of a Canadian resident that is a corporation, in some cases the deemed dividend may be considered not to be a dividend, but rather proceeds of disposition. For a description of the tax treatment of capital gains and losses, see "Capital Gains and Capital Losses".

On a disposition of exchangeable shares to Waste Services or Capital Holdings (that is, on the exercise of any of the call rights or exchange rights), subject to the comments below under the heading "Economic Statement of October 18, 2000", a Canadian resident will be considered to:

• dispose of those exchangeable shares for proceeds of disposition equal to the fair market value determined at the time of disposition of the shares of Waste Services common stock received on the exchange plus any amount received from Waste Services or Capital Holdings equal to the amount of declared and unpaid dividends on the exchangeable shares, unless this latter amount is required to be included in computing income as a dividend;

• realize a capital gain (or capital loss) equal to the amount by which those proceeds of disposition exceed (or are less than) the sum of: (1) the Canadian resident's adjusted cost base of the exchangeable shares determined immediately before the disposition, and (2) any reasonable costs of disposition; and

Because of the call rights and the exchange rights, a holder of exchangeable shares cannot control whether the shares will be acquired by Capital Environmental (by way of redemption) or by Waste Services or Capital Holdings (by way of a purchase). As outlined above, the income tax consequences of a redemption differ significantly from those of a purchase. For a description of the tax treatment of capital gains and losses, see "Capital Gains and Capital Losses".

Table of Contents

Deemed Dividends on Exchangeable Shares

For purposes of the discussion below, dividends generally include deemed dividends arising on a disposition of exchangeable shares to Capital Environmental. As described above, a deemed dividend will not result on a disposition of exchangeable shares to Waste Services or Capital Holdings. Dividends on exchangeable shares received by an individual (including most trusts) are included in computing the individual's income when received and are subject to the gross-up and dividend tax credit rules generally applicable to taxable dividends received from a corporation resident in Canada.

Subject to the discussion below as to the denial of the dividend deduction, in the case of a Canadian resident that is a corporation, other than a "specified financial institution", dividends received on the exchangeable shares will be included in computing income and will generally be deductible in computing its taxable income. In the case of a Canadian resident corporation that is a "specified financial institution", a dividend will be deductible in computing its taxable income only if the "specified financial institution" did not acquire the exchangeable shares in the ordinary course of the business carried on by it.

If Waste Services or any other person with whom Waste Services does not deal at arm's length is a "specified financial institution" when a dividend is paid on an exchangeable share, dividends received by a Canadian resident that is a corporation will be included in computing income but will not be deductible in computing taxable income. Waste Services has advised counsel that neither it nor any person with whom it does not deal at arm's length will be a "specified financial institution" following the effective date of the migration transaction.

A "private corporation" or a "subject corporation," as defined in the Income Tax Act (Canada), may be liable under Part IV of the Income Tax Act (Canada) to pay a refundable tax of 33 1/3% on dividends received on exchangeable shares to the extent they are deductible in computing taxable income. A "Canadian-controlled private corporation," as defined in the Income Tax Act (Canada), may be liable to pay an additional refundable tax of 6 2/3% on dividends received on exchangeable shares to the extent they are not deductible in computing taxable income.

The exchangeable shares will be "taxable preferred shares" and "short-term preferred shares" for the purposes of the Income Tax Act (Canada). Accordingly, Capital Environmental will be subject to a 50% (reduced from 66 2/3% under the tax proposals) tax under Part VI.l of the Income Tax Act (Canada) on dividends paid on the exchangeable shares in excess of an annual dividend allowance and will be entitled to deduct three times (increased from 9/4 under the tax proposals) the amount of such tax payable in computing its taxable income under Part I of the Income Tax Act (Canada). Dividends received on the exchangeable shares will not be subject to the 10% tax under Part IV.1 of the Income Tax Act (Canada).

Dividends on shares of common stock of Waste Services

Dividends on shares of common stock of Waste Services, including the amount of U.S. taxes withheld therefrom, are included in the Canadian resident's income when received and are not eligible for:

• the gross-up and dividend tax credit, in the case of recipients who are individuals; or

• the deduction in computing taxable income, in the case of recipients that are corporations,

in each case, as described under "Dividends on Exchangeable Shares". A "Canadian-controlled private corporation" may be liable to pay a refundable tax of 6 2/3% on such amounts. U.S. withholding tax on such amounts may be credited against the Canadian resident's income tax payable or deducted from income subject to limitations in the Income Tax Act (Canada). See "U.S. Federal Income Tax Consequences - Non-U.S. Holders".

Disposition of shares of Waste Services common stock

On a disposition of shares of Waste Services common stock, a Canadian resident will realize a capital gain (or capital loss) equal to the amount by which the proceeds of disposition received exceed (or are less than) the sum of:
(1) the Canadian resident's adjusted cost base of those shares of Waste Services

Table of Contents

common stock, and (2) any reasonable costs of disposition. For a description of the tax treatment of capital gains and losses, see "Capital Gains and Capital Losses".

Capital Gains and Capital Losses

Generally, one-half of any capital gain (the "taxable capital gain") is required to be included in the Canadian resident's income for the taxation year of disposition, and one-half of any capital loss (the "allowable capital loss") may be deducted against the Canadian resident's taxable capital gains for the taxation year of disposition. Allowable capital losses in excess of taxable capital gains in a particular taxation year can generally be deducted against the net taxable capital gains of the three immediately prior taxation years or any later taxation year, subject to certain limitations in the Income Tax Act (Canada).

When an individual (other than certain trusts) realizes a capital gain, alternative minimum tax may arise, depending on the individual's particular circumstances. A "Canadian-controlled private corporation" may be liable to pay an additional refundable tax of 6 2/3% on "taxable capital gains".

The amount of any capital loss realized by a corporation on the disposition of a share may be reduced by the amount of dividends received or deemed to be received on that share. Similar rules may apply where a corporation is a member of a partnership or a beneficiary of a trust that owns shares, directly or indirectly, through a partnership or trust.

Foreign Investment Entity Draft Legislation

On October 30, 2003, the Canadian Minister of Finance released revised draft legislation to amend the Income Tax Act (Canada) to implement previously announced rules concerning the taxation of holdings in "foreign investment entities". The proposed rules are to apply to taxation years commencing after 2002. It is not certain, however, that the draft legislation will be enacted in the form announced or at all. In general terms, the proposed rules would apply to a share of, or a property that is convertible into, exchangeable for, or confers a right to acquire a share of, a "foreign investment entity" other than an "exempt interest".

The proposed rules would require a determination, on an annual basis, as to whether or not Waste Services is a "foreign investment entity" and whether the shares of Waste Services common stock constitute an "exempt interest".

Based on the activity to be carried on by Waste Services and its subsidiaries immediately following the migration transaction, it is unlikely that Waste Services will then be a "foreign investment entity" under the proposed rules. Canadian counsel to Capital Environmental expresses no opinion on such status.

In any event, a share of Waste Services common stock would be an "exempt interest" of a Canadian resident if the shares of Waste Services common stock are listed on a "prescribed stock exchange" (which includes the Nasdaq), there are at least 150 holders, each of whom owns shares of Waste Services common stock with a fair market value of at least $500, the Canadian resident holder together with non-arm's length persons does not own more than 10% of the shares of Waste Services common stock and it is reasonable to conclude that the Canadian resident had no tax avoidance motive for the acquisition of the share. For this purpose, the Canadian resident will be regarded as having a tax avoidance motive if it is reasonable to conclude that the main reasons for acquiring the share include benefiting from income, profits or gains or increases in value in respect of "investment property" held by the Waste Services group and from the deferral or reduction of tax on such income, profits or gains. The proposed rules set out a number of factors to be considered in determining the existence of a tax avoidance motive.

If Waste Services were a "foreign investment entity" and if the shares of Waste Services common stock did not constitute an "exempt interest" of a Canadian resident, the Canadian resident would be required to take into account in computing income, on an annual basis, the "designated cost" of the shares of Waste Services common stock multiplied by a prescribed rate of interest. Alternatively, the Canadian resident may be permitted to elect the "mark-to-market" method under which the Canadian resident

Table of Contents

would be required to take into account in computing income any increase (or decrease) in the value of the shares of Waste Services common stock during each taxation year.

Economic Statement of October 18, 2000

In the Economic Statement released on October 18, 2000, the Canadian Minister of Finance announced a proposal to formulate and introduce a rule to permit shares of a Canadian corporation held by a Canadian resident to be exchanged for shares of a foreign corporation on a tax-deferred basis. This statement included no details of the circumstances in which such tax-deferred share-for-share exchange could occur but rather indicated that these rules would be developed in consultation with the private sector. The Minister's statement indicated that any such rule would not be effective before the public release of draft legislation including such rule. In the Federal Budget of March 23, 2004, the Canadian Minister of Finance stated that a detailed proposal will be released in the near future for public review and comment. To date, a detailed proposal has not been released.

Draft legislation containing the proposed rule described above could be released in time to affect the exchange of such exchangeable shares for shares of Waste Services common stock, and it is therefore possible that such exchange may be achieved on a tax-deferred basis. In any case until such rule is developed and released, it is not possible to state whether it would apply to an exchange of exchangeable shares for shares of Waste Services common stock. Shareholders should consult their own tax advisors once the draft legislation is released to determine how it might apply to their particular circumstances.

Foreign Property Information Reporting

A holder of shares of Waste Services common stock who is a "specified Canadian entity" for a taxation year or fiscal period and whose total cost amount of "specified foreign property", including the shares of Waste Services common stock, at any time in the year or fiscal period exceeds Cdn$100,000 is required to file an information return for the year or period disclosing prescribed information, including the holder's cost amount, any dividends received in the year and any gains or losses realized in the year, in respect of such property. With some exceptions, a taxpayer resident in Canada in the year will be a "specified Canadian entity". Holders of shares of Waste Services common stock should consult their own tax advisors about whether they must comply with these rules.

U.S. Federal Income Tax Consequences

In the opinion of Shearman & Sterling LLP, special U.S. federal income tax counsel to Waste Services Inc., the following discussion accurately describes the material U.S. federal income tax consequences of the ownership and disposition of shares of Waster Services common stock that generally are applicable to beneficial owners ("Holders") acquiring such shares pursuant to the exercise of the warrants or, in the case of "Non-U.S. Holders" (as defined below), in exchange for the exchangeable shares. This summary is based upon the Internal Revenue Code of 1986, as amended (the "Code"), existing and proposed Treasury regulations, administrative pronouncements of the Internal Revenue Service ("IRS") and judicial decisions, all as currently in effect, and all of which are subject to change, possibly on a retroactive basis, or differing interpretations. No ruling has been or will be sought from the IRS with respect to any of the U.S. federal income tax considerations discussed below. There can be no assurance that the IRS will not disagree with or challenge any position taken with respect to such tax considerations, or that any such position, if challenged, would be sustained.

This summary applies only to Holders that have held warrants or, in the case of Non-U.S. Holders, exchangeable shares, and that will hold shares of Waste Services common stock, as capital assets, within the meaning of the Code. Moreover, this summary is intended for general information only, and does not address all of the U.S. federal income tax considerations that may be relevant to the particular circumstances of Holders, or to Holders that may be subject to special treatment under U.S. federal income tax rules (such as financial institutions, insurance companies, broker-dealers, tax-exempt organizations, partnerships and other pass-through entities, expatriates of the United States, Holders that

Table of Contents

hold their Waste Services common stock as a hedge or as part of a straddle, constructive sale or conversion or other integrated transaction, Holders who acquired warrants or exchangeable shares as compensation, Holders subject to the alternative minimum tax, Holders owning, directly or indirectly, actually or constructively, more than 5% of the shares of Waste Services common stock and U.S. Holders (as defined below) having a functional currency other than the U.S. dollar). Finally, this summary does not discuss the application to Holders of any state, local or non-U.S. tax laws, or any aspect of U.S. federal tax law other than income taxation.

Prospective Holders should consult their tax advisors as to the particular tax consequences to them of the ownership and disposition of shares of Waste Services common stock, including the application and effect of state, local and non-U.S. tax laws.

For purposes of this summary, a "U.S. Holder" is a beneficial owner of shares of Waste Services common stock that, for U.S. federal income tax purposes, is (i) an individual who is a citizen or resident of the United States; (ii) a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States or any state thereof or the District of Columbia; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (iv) a trust if (A) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of such trust or (B) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. A "Non-U.S. Holder" is a beneficial owner of shares of Waste Services common stock that is not a U.S. Holder or a partnership (including an entity that is treated as a partnership for U.S. federal income tax purposes). If a partnership holds shares of Waste Services common stock, the U.S. federal income tax treatment of a partner in the partnership generally will depend upon the status of the partner and the activities of the partnership. Partners of partnerships that hold shares of Waste Services common stock should consult their tax advisors.

Taxation of U.S. Holders

Exercise of warrants. A U.S. Holder will not be subject to U.S. federal income tax as a result of the exercise of warrants to purchase shares of Waste Services common stock. A U.S. Holder's adjusted tax basis in the shares of Waste Services common stock received pursuant to the exercise of the warrants will be equal to the sum of the amount paid, if any, to purchase the warrants and the exercise price paid for the shares of Waste Services common stock received pursuant to the exercise of the warrants. The holding period for such shares of Waste Services common stock will not include the period of time that the U.S. Holder held the warrants.

Dividends. Distributions of cash or property in respect of shares of Waste Services common stock that are paid out of current or accumulated earnings and profits (as determined under U.S. federal income tax principles) of Waste Services will constitute dividends for U.S. federal income tax purposes. A dividend paid to a U.S. Holder will be includible in gross income, as ordinary dividend income, at the time of receipt. Any distribution in respect of shares of Waste Services common stock that exceeds the current and accumulated earnings and profits of Waste Services will be treated first as a tax-free return of capital to the extent of the U.S. Holder's adjusted tax basis in the shares of Waste Services common stock, and thereafter as capital gain from the sale or exchange of the Waste Services common stock.

Under current U.S. federal income tax law, certain U.S. Holders (including individuals) are eligible for preferential rates of U.S. federal income taxation on dividends in respect of the Waste Services common stock paid through December 31, 2008. U.S. Holders that are corporations can qualify for a "dividends received deduction" for dividends in respect of Waste Services common stock. The ability of U.S. Holders to obtain preferential U.S. federal income tax rates or a dividends received deduction in respect of dividends is subject to the satisfaction of minimum holding period and other requirements.

Sales or other taxable dispositions. Upon a sale or other taxable disposition of shares of Waste Services common stock, a U.S. Holder generally will recognize capital gain or loss equal to the difference between the amount realized on the sale or other taxable disposition and the U.S. Holder's adjusted tax

Table of Contents

basis in the shares of Waste Services common stock. Such capital gain or loss will be long-term capital gain or loss if the U.S. Holder has held the shares of Waste Services common stock for more than one year at the time of the sale or other taxable disposition. Long-term capital gains of certain U.S. Holders (including individuals) are eligible for reduced rates of U.S. federal income taxation. The deductibility of capital losses is subject to limitations under the Code

Taxation of Non-U.S. Holders

Receipt of Waste Services common stock upon the exercise of warrants or an exchange of exchangeable shares. A Non-U.S. Holder will not be subject to U.S. federal income tax as a result of the exercise of warrants to purchase shares of Waste Services common stock. A Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain realized on the exchange of exchangeable shares for shares of Waste Services common stock, unless (i) the gain is effectively connected with such Non-U.S. Holder's conduct of a trade or business within the United States and, if an applicable income tax treaty requires, the gain is attributable to a permanent establishment maintained by such Non-U.S. Holder in the United States, or (ii) the Non-U.S. Holder is an individual who was present in the United States for 183 or more days in the taxable year of the exchange and certain other conditions are met. . However, while the matter is not clear under current U.S. federal income tax law, an exchange of exchangeable shares for Waste Services common stock may be able to qualify as a tax-free "reorganization" under section 368 of the Code. Where relevant, Non-U.S. Holders should consult their own tax advisors regarding the possible U.S. federal income tax treatment of such an exchange as a reorganization.

If Waste Services is determined to be a United States real property holding corporation, or USRPHC, a Non-U.S. Holder might be subject to U.S. federal income tax in respect of gain realized on the exchange of exchangeable shares for shares of Waste Services common stock in some circumstances. See "Sales or Other Taxable Dispositions" below.

Dividends. Dividends in respect of shares of Waste Services common stock that are paid to a Non-U.S. Holder generally will be subject to U.S. federal withholding tax at a 30% rate or at a lower rate as may be specified by an applicable income tax treaty. In this regard, under the income tax treaty in effect between the United States and Canada, the rate of U.S. federal withholding tax on dividends can be reduced to 15% for qualifying Non-U.S. Holders. In order for a Non-U.S. Holder to obtain a reduced rate of U.S. federal withholding tax under an applicable income tax treaty, the Non-U.S. Holder will be required to provide a properly completed and executed IRS Form W-8BEN (or a successor form) establishing the Non-U.S. Holder's eligibility for benefits under such treaty. If a dividend received by a Non-U.S. Holder is effectively connected with the conduct by the Non-U.S. Holder of a trade or business within the United States and, if an applicable income tax treaty requires, attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder, then the dividend will not be subject to U.S. federal withholding tax provided that the Non-U.S. Holder furnishes a properly completed and executed IRS Form W-8ECI (or a successor form). Instead, the Non-U.S. Holder generally will be taxable on such an "effectively connected" dividend in the same manner as a U.S. resident (and thus, subject to U.S. federal income tax on a net basis at the regular graduated tax rates). A Non-U.S. Holder that is a corporation also may be subject to a "branch profits tax" equal to 30%, or a lower rate as may be specified by an applicable income tax treaty, of its earnings and profits for the taxable year, subject to adjustments, that are effectively connected with the conduct of a trade or business within the United States.

Sales or Other Taxable Dispositions. A Non-U.S. Holder generally will not be subject to U.S. federal income tax with respect to gain realized on the sale or other taxable disposition of shares of common stock of Waste Services unless
(i) such gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States and, if an applicable income tax treaty requires, the gain is attributable to a U.S. permanent establishment maintained by the Non-U.S. Holder; (ii) the Non-U.S. Holder is an individual who is present in the United States for 183 or more days in the taxable year of the sale or other taxable disposition and certain other conditions are met or
(iii) Waste Services is or has been a U.S. real property holding corporation, or USRPHC, within the meaning of section 897(c)(2) of the Code, at any time during the shorter of the five-year period preceding the sale or

Table of Contents

other taxable disposition or the Non-U.S. Holder's holding period for the stock, provided that, so long as shares of Waste Services common stock are regularly traded on an established securities market, U.S. federal income taxation under the USRPHC rules described in clause (iii) will apply to only Non-U.S. Holders who hold or held, directly or indirectly, actually or constructively, more than 5% of the shares of Waste Services common stock at any time during the shorter of the foregoing periods. Generally, a corporation is a USRPHC if the fair market value of its "U.S. real property interests" equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although Waste Services does not believe that it is or will become a USRPHC, no assurance can be given that Waste Services will not be determined to be a USRPHC because the assets of Waste Services includes significant U.S. real property interests. Furthermore, no assurance can be given that shares of Waste Services common stock will be or remain regularly traded on an established securities market. A Non-U.S. Holder should consult its tax advisor as to the application of the USRPHC rules to the ownership and disposition of shares of Waste Services common stock.

Information Reporting and Backup Withholding

Dividend payments made with respect to shares of Waste Services common stock and proceeds from the sale, exchange or other disposition of shares of Waste Services common stock will be subject to information reporting requirements, and to possible U.S. backup withholding (currently at a rate of 28%). In general, backup withholding will apply with respect to reportable payments made to a U.S. Holder unless (i) the U.S. Holder is a corporation or other exempt recipient and, if required, demonstrates such exemption, or (ii) the U.S. Holder furnishes the payor with a taxpayer identification number on IRS Form W-9 in the manner required, certifies under penalty of perjury that such U.S. Holder is not currently subject to backup withholding and otherwise complies with the backup withholding requirements. A Non-U.S. Holder may be required to certify as to its non-U.S. status on IRS Form W-8BEN (or other applicable form) in order in order to establish an exemption from backup withholding. Backup withholding is not an additional tax. Rather, the amount of any backup withholding imposed on a payment to a Holder will be allowed as a refund or a credit against such Holder's U.S. federal income tax liability, provided that the required information is furnished to the IRS.