Navigating the most complicated risks.

Contingent Digital Producers Contingent Digital Producers

Delivering Certainty: Eliminating a D.C. Tax Exposure for a Smooth Exit

Castle Harbour assisted a real estate investment fund in eliminating a local tax uncertainty during the fund’s exit from a major investment.

Castle Harbour assisted a real estate investment fund in eliminating a local tax uncertainty during the fund’s exit from a major investment.

The fund had sold its sole remaining property – a high-value commercial building in Washington, D.C. – realizing a substantial capital gain. Because the sale effectively marked the end of the fund’s business activities in D.C., there was an open question under D.C. tax regulations whether the gain would be subject to the district’s unincorporated business franchise tax (D.C. UBT) at the entity level, or if it would pass through to the fund’s out-of-state investors untaxed. This ambiguity threatened to tie up proceeds in reserve and delay final investor distributions. Castle Harbour worked closely with the fund’s tax counsel to resolve the issue via insurance. By clearly articulating the position that the fund’s D.C. business had terminated (making the gain exempt at the entity level), the team obtained an insurance policy covering the risk that D.C. authorities might nonetheless attempt to tax the sale. This solution delivered full certainty to the fund and its investors: they could confidently wind down the fund and distribute sale proceeds, knowing any unforeseen D.C. tax assessment on the transaction would be covered by the insurer.

Policy type: Tax Insurance (Contingent Tax Risk)
Size: $100MM – $250MM
Sector: Real Estate

Buyer type: Financial Sponsor
Buyer jurisdiction: U.S.
Seller jurisdiction: U.S.

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Contingent Digital Producers Contingent Digital Producers

Overcoming Cross-Border Tax Uncertainty: Facilitating a Strategic Investment

Castle Harbour was engaged to navigate a complex international tax dispute in the context of a private equity investment.

Castle Harbour was engaged to navigate a complex international tax dispute in the context of a private equity investment.

A global infrastructure fund was acquiring a significant minority stake in a U.S. company with operations in Mexico. During the deal, a pending challenge by the Mexican tax authority came to light: the authority claimed that the company’s Mexican subsidiary owed substantial withholding taxes on intra-group technical service fees paid to the U.S. parent, despite a tax treaty that exempted those payments. The potential exposure – including back taxes, denied deductions, and penalties spanning multiple years – posed a serious concern for the investor. Leveraging its cross-border tax expertise, Castle Harbour worked with the client’s advisors to turn this contentious issue into an insurable risk. The team emphasized the robust defenses available (including favorable rulings the company had already obtained from Mexican authorities) and tapped into underwriters experienced in treaty-based tax matters. Castle Harbour negotiated a tax insurance policy to cover the disputed liability, ensuring that if the Mexican tax claim were ultimately upheld, the financial impact would fall on the insurer. This innovative solution gave the investor the certainty to proceed with the transaction, knowing that a challenging foreign tax issue had been effectively neutralized.

Policy type: Tax Insurance (Contingent Tax Risk)
Size: $500MM - $1B
Sector: Infrastructure / Logistics

Buyer type: Financial Sponsor
Buyer jurisdiction: U.S.
Seller jurisdiction: U.S.

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Tax Digital Producers Tax Digital Producers

Preserving Value: Mitigating an Employee Reimbursement Tax Risk

Castle Harbour supported a corporate acquirer in overcoming a tax exposure that surfaced during the acquisition of an aviation services company.

Castle Harbour supported a corporate acquirer in overcoming a tax exposure that surfaced during the acquisition of an aviation services company.

Diligence revealed that the target had been paying its employees per diem allowances and travel reimbursements under an “accountable plan” – a tax-favored arrangement whereby such payments aren’t treated as wages if certain IRS rules are met. The concern was that if the IRS later found the plan to be non-compliant, those routine employee payments could be reclassified as taxable wages, leaving the company on the hook for years of unpaid payroll taxes, interest, and penalties. Castle Harbour drew on its technical tax knowledge to craft an insurance solution transferring this risk. The team prepared a persuasive underwriting submission demonstrating the company’s compliance efforts and obtained a policy affirming the tax treatment of the reimbursements. By insuring this exposure, Castle Harbour allowed the buyer to close the deal without a payroll tax cloud on the horizon – preserving the transaction value and sparing the company from a potentially costly post-closing surprise.

Policy type: Tax Insurance (Buyer-Side)
Size: $100MM – $250MM
Sector: Aviation Services

Buyer type: Strategic (Corporate)
Buyer jurisdiction: U.S.
Seller jurisdiction: U.S.

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Tax Digital Producers Tax Digital Producers

Preserving a Key Tax Election in an M&A Transaction

Castle Harbour was engaged by a financial sponsor to address a latent tax risk related to a previous acquisition structured under Section 338(h)(10) of the tax code.

Castle Harbour was engaged by a financial sponsor to address a latent tax risk related to a previous acquisition structured under Section 338(h)(10) of the tax code.

In the earlier deal, the buyer had elected to treat a stock purchase as an asset acquisition for tax purposes – a valuable election that provides a stepped-up asset basis – but some of the target’s shareholders rolled a portion of their equity into the new company. This partial equity rollover introduced uncertainty about whether the 338(h)(10) election was technically valid. Drawing on its transactional tax expertise, Castle Harbour helped the client mitigate this risk. The team distilled the issue (the potential failure of the tax election due to the rollover) into a clearly defined insured event and approached the insurance market with a comprehensive analysis from tax counsel. Castle Harbour successfully obtained a tax insurance policy that would protect the client if the IRS ever invalidated the election. This coverage preserved the expected tax benefits of the deal and shielded the client from a significant tax cost that would have arisen if the step-up were lost.

Policy type: Tax Insurance (Buyer-Side)
Size: $100MM – $250MM
Sector: Transportation Services

Buyer type: Financial Sponsor
Buyer jurisdiction: U.S.
Seller jurisdiction: U.S.

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RWI Digital Producers RWI Digital Producers

Advocacy in Action: Strategic Recovery After Major Revenue Loss

Following a post-closing contract loss, Castle Harbour led a strategic RWI claims process that secured over $8 million for a private equity client in under six months.

Following a post-closing contract loss, Castle Harbour led a strategic RWI claims process that secured over $8 million for a private equity client in under six months.

Castle Harbour was engaged by a private equity client to place RWI for its acquisition of a technology services company. Following closing, the target’s largest customer—representing over 20% of revenue—unexpectedly terminated its contract. Although the seller had represented that customer relationships were stable, a post-closing review revealed that the seller had prior knowledge of the customer’s dissatisfaction and desire to terminate its relationship, constituting a breach of the material customer representation.

Castle Harbour immediately helped the client prepare a detailed notice of claim, aligning the narrative precisely with policy language, and assisted in gathering supporting evidence of both the customer loss and the seller’s awareness. We also proactively engaged the insurer early and positioned the claim strategically to encourage a favorable outcome, maintaining active dialogue throughout to avoid delays. As a result of Castle Harbour’s strategic claims management, the insurer promptly acknowledged coverage, and the client received a material payment exceeding $8 million—covering losses tied to the canceled contract. The matter was resolved within approximately six months of the initial notice, a significantly faster timeline than is typical for RWI claims, and with a highly favorable result that minimized the financial impact to the client.

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The case studies presented are illustrative in nature and are intended solely for informational purposes. They may include experiences of Castle Harbour brokers while employed at other firms. Certain details have been modified or omitted to preserve client confidentiality and comply with applicable legal and regulatory obligations. These examples do not represent specific recommendations or guarantees of future outcomes.