PBF Energy 2013 Annual Report Download - page 116

PBF ENERGY INC. AND
PBF HOLDING COMPANY LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
F- 20
Attributable to
PBF Energy Inc.
Noncontrolling
Interest Total
Net income $ 1,956 $ 802,081 $ 804,037
Other comprehensive income (loss):
Unrealized gain on available for sale securities — 2 2
Amortization of defined benefit plans unrecognized
net loss (61)(6,506)(6,567)
Total other comprehensive loss (61)(6,504)(6,565)
Total comprehensive income $ 1,895 $ 795,577 $ 797,472
Tax Receivable Agreement
PBF LLC intends to make an election under Section 754 of the Internal Revenue Code (the “Code”) effective for
each taxable year in which an exchange of PBF LLC Series A Units for PBF Energy Class A common stock as
described above occurs, which may result in an adjustment to the tax basis of the assets of PBF LLC at the time
of an exchange of PBF LLC Series A Units. As a result of both the initial purchase of PBF LLC Series A Units
from the PBF LLC Series A Unit holders in connection with the IPO and subsequent exchanges, PBF Energy will
become entitled to a proportionate share of the existing tax basis of the assets of PBF LLC. In addition, the purchase
of PBF LLC Series A Units and subsequent exchanges are expected to result in increases in the tax basis of the
assets of PBF LLC that otherwise would not have been available. Both this proportionate share and these increases
in tax basis may reduce the amount of tax that PBF Energy would otherwise be required to pay in the future. These
increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets
to the extent tax basis is allocated to those capital assets.
PBF Energy entered into a tax receivable agreement with the PBF LLC Series A Unit holders (the “Tax Receivable
Agreement”) that provides for the payment by PBF Energy to the PBF LLC Series A Unit holders of an amount
equal to 85% of the amount of the benefits, if any, that PBF Energy is deemed to realize as a result of (i) these
increases in tax basis and (ii) certain other tax benefits related to entering into the Tax Receivable Agreement,
including tax benefits attributable to payments under the Tax Receivable Agreement. For purposes of the Tax
Receivable Agreement, the benefit deemed realized by PBF Energy will be computed by comparing the actual
income tax liability of PBF Energy (calculated with certain assumptions) to the amount of such taxes that PBF
Energy would have been required to pay had there been no increase to the tax basis of the assets of PBF LLC as
a result of the purchase or exchanges of PBF LLC Series A Units and had PBF Energy not entered into the Tax
Receivable Agreement. The term of the Tax Receivable Agreement will continue until all such tax benefits have
been utilized or expired, unless PBF Energy exercises its right to terminate the Tax Receivable Agreement, PBF
Energy breaches any of its material obligations under the Tax Receivable Agreement or certain changes of control
occur, in which case all obligations will generally be accelerated and due as calculated under certain assumptions.
The payment obligations under the Tax Receivable Agreement are obligations of PBF Energy and not of PBF LLC
or PBF Holding. In general, PBF Energy expects to obtain funding for these payments by causing PBF Holding
to distribute cash to PBF LLC, which will then distribute this cash, generally as tax distributions, on a pro-rata
basis to its owners. Such owners include PBF Energy, which holds a 40.9% interest as of December 31, 2013.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Presentation
These consolidated financial statements include the accounts of PBF Energy and subsidiaries in which PBF Energy
has a controlling interest. All intercompany accounts and transactions have been eliminated in consolidation.