PBF Energy 2013 Annual Report Download - page 83

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In connection with the acquisition of Toledo, the seller initially retains, subject to certain limitations,
remediation obligations which will transition to us over a 20-year period.
In connection with the acquisition of all three of our refineries, we assumed certain environmental obligations
under regulatory orders unique to each site, including orders regulating air emissions from each facility.
(f) Pension and Post-retirement Obligations
Pension and post-retirement obligations include only those amounts we expect to pay out in benefit payments
and are further explained at the Employee Benefit Plans footnote to our financial statements, “Item 8. Financial
Statements and Supplementary Data.”
(g) Tax Receivable Agreement Obligations
We used a portion of the proceeds from our IPO to purchase PBF LLC Series A Units from the the members
of PBF LLC other than PBF Energy. In addition, the members of PBF LLC other than PBF Energy may (subject
to the terms of the exchange agreement) exchange their PBF LLC Series A Units for shares of Class A common
stock of PBF Energy on a one-for-one basis. As a result of both the purchase of PBF LLC Series A Units and
subsequent Secondary Offerings and exchanges, PBF Energy is 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 the future disposition of certain capital assets to the extent tax basis is allocated to those capital
assets. We have entered into a tax receivable agreement with the members of PBF LLC other than PBF Energy
that provides for the payment by PBF Energy to our previous owners of 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. These payment obligations are obligations of PBF Energy and not of PBF LLC or any of
its subsidiaries.
PBF Energy expects to obtain funding for these payments by causing PBF Holding to make cash distributions
to PBF LLC, which, in turn, will distribute such amounts, generally as tax distributions, on a pro-rata basis to its
owners, which as of December 31, 2013 include the members of PBF LLC other than PBF Energy holding a 59.1%
interest and PBF Energy holding a 40.9% interest. The members of PBF LLC other than PBF Energy may reduce
their ownership in PBF LLC by exchanging their PBF LLC Series A Units for shares of PBF Energy Class A
common stock. Such exchanges may result in additional increases in the tax basis of PBF Energy’s investment in
PBF LLC and require PBF Energy to make increased payments under the tax receivable agreement. Required
payments under the tax receivable agreement also may increase or become accelerated in certain circumstances,
including certain changes of control. See “Item 1A. Risk Factors—Risks Related to Our Organizational Structure
and Our Class A Common Stock—In certain cases, payments by us under the tax receivable agreement may be
accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the
tax receivable agreement. These provisions may deter a change in control of our company.”
The table above reflects our estimated timing of payments under the tax receivable agreement assuming no
material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that
are subject to the tax receivable agreement as of December 31, 2013. In addition, in January 2014, Blackstone and
First Reserve completed a secondary offering which is estimated to increase our tax receivable agreement liability
to $439.6 million as a result of the secondary offering and the corresponding tax benefits expected to be generated
in future years from this transaction.