What is the Tax Benefit Preservation Plan (TBPP)?

The Tax Benefit Preservation Plan (TBPP) is a strategic measure implemented by Ford to safeguard its valuable tax attributes, such as tax credit carryforwards. These attributes can significantly reduce the company's future federal income tax obligations by offsetting taxable income. The plan aims to prevent hostile takeovers or other significant changes in ownership that could trigger limitations under IRS Section 382, thereby preserving the company's ability to utilize these tax benefits.

Why did Ford extend the TBPP and for how long?

Ford extended the TBPP through Amendment No. 3 to ensure the continued protection of its substantial tax attributes. These benefits are critical for reducing future tax liabilities. The plan was extended to September 30, 2021, from its original expiration date of September 30, 2018, providing continued security for these financial assets.

What happens if someone acquires a significant portion of Ford's stock?

Under the TBPP, if any individual or group acquires 4.99% or more of Ford's outstanding common stock (with certain exceptions), it can trigger a 'triggering event.' This event is designed to cause significant dilution in the ownership interest of the acquiring party. Other common stockholders would then have the opportunity to purchase additional shares at a discount, or Ford's Board might elect to exchange rights for common stock, thereby protecting the tax benefits from being adversely affected by a change in control.

Does this amendment affect my existing Ford stock?

For existing shareholders, this amendment to the TBPP is primarily a protective measure for the company's financial health and future tax efficiency. It does not directly alter your current ownership rights. However, it aims to prevent situations where a large shareholder acquisition could jeopardize the company's ability to utilize its tax benefits, which indirectly supports shareholder value.

F 8-K: Material Agreements & Shareholder Matters

Summary

Ford Motor Company (F) filed an 8-K on September 13, 2018, to announce an amendment to its Tax Benefit Preservation Plan (TBPP). This amendment, the third to the plan, extends the expiration date of the TBPP from September 30, 2018, to September 30, 2021, unless terminated earlier. The primary purpose of the TBPP is to protect Ford's substantial tax attributes, which at year-end 2017 were estimated to offset over $25 billion in taxable income. These attributes are crucial for reducing future federal income tax liabilities. The TBPP is designed to prevent an "ownership change" under Section 382 of the Internal Revenue Code, which could significantly limit Ford's ability to utilize these tax benefits. The plan works by triggering dilution to any person or group acquiring 4.99% or more of Ford's common stock, effectively deterring hostile takeovers that could jeopardize these valuable tax assets. This extension ensures continuity in safeguarding these financial benefits for the company and its shareholders.

Key Highlights

1Ford Motor Company extended its Tax Benefit Preservation Plan (TBPP) through Amendment No. 3.
2The expiration date of the TBPP has been moved from September 30, 2018, to September 30, 2021.
3The TBPP's main objective is to preserve Ford's significant tax attributes, estimated at over $25 billion at the end of 2017.
4These tax attributes can offset future taxable income and reduce federal income tax liabilities.
5The plan is designed to prevent an 'ownership change' that could limit the use of these tax benefits under IRS rules.
6A trigger event occurs if a person or group acquires 4.99% or more of Ford's common stock, leading to potential dilution for that acquirer.
7The Ford Board of Directors retains discretion to exempt acquisitions or terminate the TBPP at any time.

FORD MOTOR CO 8-K Report, Material Agreement (Sep 14, 2018)

Summary

Key Highlights

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