Covington & Burling LLP operates as a limited liability partnership worldwide, with the practice in England and Wales conducted by an affiliated
limited liability multinational partnership, Covington & Burling LLP, which is formed under the laws of the State of Delaware in the United States
and authorized and regulated by the Solicitors Regulation Authority with registration number 77071..
Kurt Baca is a member of the firm’s Tax Practice Group. He has a diverse transactional and planning practice ranging from advising on bank mergers and acquisitions, including mutual bank mergers, REIT structuring and qualification issues, internal reorganizations, various debt financing transactions, including convertible debt issuances with integrated bond hedges and capped calls, project finance, currency hedging and related straddle issues, interest deductibility planning, including section 163(j) planning, the use of REMIC residual interests, and the use of various financial products for efficient investment structures and intra-group tax asset utilization. Much of his work involves cross-border issues, subpart F and NCTI (formerly GILTI) planning, and PFIC issues.
While his practice is diverse, Kurt is particularly interested in innovative uses of financial products and fundamental tax issues relating to the character of income, tax ownership, debt/equity, economic substance, and aggregate vs. entity treatment of pass-through entities as they relate to planning tax-efficient transactions and structures. Recent examples of Kurt’s projects include:
Advising asset managers on innovative derivative investments in various types of funds, involving swaps and variable forward contracts;
Advising on the development of structured notes to be acquired by life insurance companies to support variable annuity contracts and private placement life insurance contracts;
Advising on the availability of the dividends received deductions for dividends received on shares of a basket of stock acquired to hedge the risks related to writing options on equity indices;
Advising on the use of revenue strips in intra-company/intra group transactions to effectively use tax attributes;
Advising on the structuring of bond hedges and capped call options acquired in connection with the issuance of convertible debt to meet the requirements for tax integration;
Advising on the use of commodity swaps to transfer income risks and benefits between member of a multi-national group of companies;
Advising on the structuring of off-shore energy projects to assure the desired income treatment for U.S. tax purposes; and
Advising a REIT on the use of REIT subsidiaries and protective trusts to meet REIT qualification requirements.
Some of this work has included advising clients on issues connected with acquiring tax insurance.
Kurt has nearly 30 years of experience. He has advised on a significant variety of innovative transactions over that time. Those transactions have, among other things, involved foreign tax credits, contingent payment debt instruments, credit default swaps, and partnership allocations. He has also represented issuers and underwriters in the development and execution of high profile capital market transactions, including various forms of convertible debt and structured investment units. Kurt has experience in advising clients in controversies arising from corporate financing transactions.
Advised issuers on the tax structuring and tax treatment of equity derivatives transactions to hedge convertible or exchangeable notes, including three recent transactions for IAC/InterActiveCorp.
Advised several bank holding companies in the tax-free acquisition of target bank holding companies and banks, including WSFS Financial Corporation in its acquisition of Philadelphia-based Beneficial Bancorp, Inc., in a transaction valued at approximately $1.5 billion and Veritex Holdings in its $1 billion acquisition of Houston-based Green Bancorp.
Advised various organizations, including a multi-national financial institutio, in connection with the organization of their business activities to separate qualified businesses from other activities and secure a deduction for qualified business income under section 199A.
Advised professional sports leagues with respect to various financing arrangements, including financing for stadium construction, team operations, and club purchases.
Advised sellers in connection with the tax treatment of installment sales of various franchise rights, including the accrual of interest and original issue discount on deemed loans in connection with the sales, realization of gains and losses in connection with modifications to the terms of the sales under section 1.1001-3, timing of inclusions under the installment method under section 453, and the payment of interest on deferred payments under section 453A.
Advised multinational financial institutions and industrials in connection with internal restructuring to maximize the benefits of net operating losses realized in connection with business operations, including assignments of income and sales of subsidiary preferred stock.
Advised a financial institution in connection with the tax consequences of hedging of its business of writing derivatives on proprietary indices, including the use of equity baskets.
Advised a U.S. industrial in connection with investments in off-shore energy projects with regard to the characterization of the investment, including investments in the form of stapled equity and debt as equity or debt, and the treatment of income from the investment as active commodities income under subpart F.
Advised a U.S. investor in connection with the characterization of an investment in a BOOT transaction in the Middle East, including the tax characterization of the transaction and the associated revenue streams as income from the sale and financing of the facility and services income from the operation of the plant.
Advised a U.S. investor in connection with the characterization of income from its investment in offshore power plants, gas pipelines and power lines as income from the provision of services (and not income from the sale or lease of project).
Advised a U.S. investor in connection with the U.S. tax consequences of the acquisition and sale of tradeable energy certificates for generation of renewable energy.
Advised on the tax treatment of insurance and annuity contracts to facilitate foreign investment in securities and real property projects, including advice in connection the treatment of variable contracts under section 817.
Advised a non-U.S. financial institution in connection with the application of the non-discrimination clause of a tax treaty to obtain treatment comparable to that given to U.S. financial institutions.
Advised a non-U.S. financial institution of the tax consequences of forming a representative office in the United States and on the conduct of its lending activities to avoid a permanent establishment in the United States.
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