Exhibit (12)(a)
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December 20, 2024
Tortoise Power and Energy Infrastructure Fund, Inc.
6363 College Boulevard, Suite 100A Overland Park, Kansas 66211 |
| |
Tortoise Power and Energy Infrastructure Fund
6363 College Boulevard, Suite 100A Overland Park, Kansas 66211 |
| Re: | Reorganization of Tortoise Power and Energy Infrastructure Fund, Inc. into Tortoise Power and Energy Infrastructure Fund |
Ladies and Gentlemen:
You have requested our opinion regarding certain U.S. federal income tax consequences of certain transactions undertaken pursuant to the Agreement and Plan of Merger, dated as of November 5, 2024 (the “Plan”), by and among Tortoise Capital Series Trust, a Maryland statutory trust (the “Successor Company”), on behalf of its series Tortoise Power and Energy Infrastructure Fund (the “Successor Fund”); TPZ Merger Sub, LLC (the “Merger Sub”), a Maryland limited liability company and a direct, wholly-owned subsidiary of the Successor Fund; and each of Tortoise Power and Energy Infrastructure Fund, Inc. (the “Predecessor Fund” and together with the Successor Fund, the “Funds”), Tortoise Pipeline & Energy Fund, Inc. and Tortoise Energy Independence Fund, Inc., each a Maryland corporation.
The Plan contemplates that (i) the Predecessor Fund will merge pursuant to applicable state law with and into Merger Sub with Merger Sub surviving (the “Merger”) and all the common shares of the Predecessor Fund will convert into all the outstanding shares of beneficial interest, par value $0.001 per share, of the Successor Fund (“New Shares”), and (ii) as soon as practicable thereafter (including following the mergers of each of Tortoise Pipeline & Energy Fund, Inc. and Tortoise Energy Independence Fund, Inc. into the Merger Sub (“Other Mergers”)) the Merger Sub will completely liquidate into the Successor Fund (the “Liquidation”) by distributing all its assets to the Successor Fund and the Successor Fund will assume all the liabilities of Merger Sub in complete liquidation and dissolution of Merger Sub (collectively, the “Reorganization”). The New Shares will consist solely of newly issued voting shares of beneficial interest, par value $0.001 per share, of the Successor Fund.
In rendering this opinion, we have examined the Plan and have reviewed and relied upon representations made to us by duly authorized officers of the Predecessor Fund, and the Successor Company, on behalf of itself and the Successor Fund, and the Merger Sub, in letters dated December 20, 2024 (collectively, the “Representation Letters”). We have also examined such other agreements, documents, corporate records and other materials as we have deemed necessary in order for us to render the opinions referred to in this letter. In such review and examination, we have assumed the genuineness of all signatures, the legal capacity and authority of the parties who executed such documents, the authenticity of all documents submitted to us as originals, the conformity to originals of all documents submitted to us as copies and the authenticity of the originals of such latter documents.
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Tortoise Power and Energy Infrastructure Fund, Inc.
Tortoise Power and Energy Infrastructure Fund
December 20, 2024
Page 2
Our opinion is based, in part, on the assumptions that (i) the Reorganization described herein will occur in accordance with the terms of the Plan (without the waiver or modification of any terms or conditions thereof and without taking into account any amendment thereof that we have not approved) and the facts and representations set forth or referred to in this letter, and that such facts and representations, as well as the facts and representations set forth in the Plan, are true, correct and complete as of the date hereof and will be true, correct and complete as of the date and time of the closing of the Merger of the Predecessor Fund (as determined under the Plan) (the “Effective Time”) through the date and time of the Liquidation, (ii) any representation set forth in the Representation Letters qualified by knowledge, intention, belief, disclaimer of responsibility or any similar qualification is, and will be as of the Effective Time through the date and time of the Liquidation, true, correct and complete without such qualification, and (iii) the Successor Fund will be treated as a corporation for federal income tax purposes effective as of the Effective Time. You have not requested that we undertake, and we have not undertaken, any independent investigation of the accuracy of the facts, representations and assumptions set forth or referred to herein.
For the purposes indicated above, and based upon the facts, assumptions and representations set forth or referred to herein, it is our opinion that for U.S. federal income tax purposes:
1. The Merger will constitute a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and the Successor Fund and the Predecessor Fund will each be a “party to a reorganization,” within the meaning of Section 368(b) of the Code, with respect to the Merger.
2. No gain or loss will be recognized by the Successor Fund or the Merger Sub upon the Merger or upon the Liquidation. (Section 1032(a) of the Code; Treas. Reg. Section 301.7701-2(a)).
3. No gain or loss will be recognized by the Predecessor Fund upon the Merger. (Sections 361(a) and (c) and 357(a) of the Code).
4. No gain or loss will be recognized by the Predecessor Fund’s shareholders upon the conversion, pursuant to the Plan, of all their shares of the Predecessor Fund solely into New Shares in the Merger, except to the extent the holders of the Predecessor Fund shares receive cash in lieu of a fractional New Share. (Section 354(a) of the Code).
5. The aggregate basis of the New Shares received by each Predecessor Fund shareholder pursuant to the Merger (including any fractional New Share to which such shareholder would be entitled) will be the same as the aggregate basis of the Predecessor Fund shares that were converted into such New Shares. (Section 358(a)(1) of the Code).
6. The holding period of the New Shares received by each Predecessor Fund shareholder in the Merger (including any fractional New Share to which such shareholder would be entitled) will include the period during which the shares of the Predecessor Fund that were converted into such New Shares were held by such shareholder, provided such Predecessor Fund shares were held by such shareholder as capital assets at the Effective Time. (Section 1223(1) of the Code).
Tortoise Power and Energy Infrastructure Fund, Inc.
Tortoise Power and Energy Infrastructure Fund
December 20, 2024
Page 3
7. The basis of the assets of the Predecessor Fund received by the Merger Sub in the Merger will be the same as the basis of such assets in the hands of the Predecessor Fund immediately before the Effective Time. (Section 362(b) of the Code).
8. The holding period of the assets of the Predecessor Fund received by the Merger Sub in the Merger will include the period during which such assets were held by the Predecessor Fund. (Section 1223(2) of the Code).
9. The payment of cash to the holders of the Predecessor Fund shares in lieu of fractional New Shares will be treated as though such fractional shares were distributed as part of the Merger and then redeemed by the Successor Fund with the result that the holder of the Predecessor Fund shares will generally have a capital gain or loss to the extent the cash distribution differs from such holder's basis allocable to the fractional New Shares.
Notwithstanding anything to the contrary herein, we express no opinion as to the effect of the Reorganization (i) on the Predecessor Fund, the Successor Fund, Merger Sub or any Predecessor Fund shareholder with respect to any asset (including without limitation any stock held in a passive foreign investment company as defined in section 1297(a) of the Code) as to which any gain or loss is required to be recognized under U.S. federal income tax principles (a) at the end of a taxable year or upon the termination thereof, or (b) upon the transfer of such asset regardless of whether such transfer would otherwise be a non-taxable transaction under the Code, (ii) under the alternative minimum tax imposed under section 55 of the Code on any direct or indirect shareholder of the Predecessor Fund that is a corporation, and (iii) any other U.S. federal tax issues (except those set forth above) and all state, local or foreign tax issues of any kind.
Facts
Our opinion is based upon the facts, representations and assumptions set forth or referred to above and the following facts and assumptions, any alteration of which could adversely affect our conclusions.
The Predecessor Fund has been registered and operated, since it commenced operations, as a closed-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Predecessor Fund’s common shares are listed and traded on the New York Stock Exchange (“NYSE”) under the symbol TPZ. Immediately prior to the Effective Time, the Predecessor Fund has no shares outstanding other than common shares. The Predecessor Fund is treated as a corporation for U.S. federal income tax purposes, has elected to be taxed as a regulated investment company under section 851 of the Code for all its taxable years, including without limitation the taxable year in which the Reorganization occurs, and has qualified and will continue to qualify for the tax treatment afforded regulated investment companies under the Code for each of its taxable years, including without limitation the taxable year in which the Reorganization occurs. All the outstanding shares of the Predecessor Fund are treated as equity for federal income tax purposes.
Tortoise Power and Energy Infrastructure Fund, Inc.
Tortoise Power and Energy Infrastructure Fund
December 20, 2024
Page 4
The Successor Company has been registered and operated, since it commenced operations, as an open-end management investment company under the 1940 Act. The Successor Fund is a newly created separate series of the Successor Company that is treated for U.S. federal income tax purposes as a separate corporation pursuant to section 851(g) of the Code. The Successor Fund was newly formed for the purpose of engaging in the Reorganization. Prior to the Effective Time, the Successor Fund will not conduct any business, except as required to consummate the Reorganization. The only outstanding shares of the Successor Fund prior to the Effective Time will consist of a single share issued to the sole shareholder of the Successor Fund to permit the sole shareholder to approve certain items related to the organization of the Successor Fund (the “Initial Share”). Such Initial Share will be redeemed and cancelled prior the Effective Time. Prior to the Effective Time, the Successor Fund will not have, and will not have had, any assets other than the consideration received for the Initial Share, which will be paid to the sole shareholder in redemption of the Initial Share prior to the Effective Time. The Successor Fund will be taxed (including without limitation through the filing of such elections as are necessary to be so treated) as a regulated investment company under section 851 of the Code and will qualify for the tax treatment afforded regulated investment companies under the Code for each of its taxable years, including, without limitation, the taxable year that includes the Closing Date (as defined in the Plan). All New Shares issued in the Reorganization will be treated as equity for federal income tax purposes.
Merger Sub is a newly formed Maryland limited liability company and a direct, wholly-owned subsidiary of the Successor Fund that is and has been since the date of its organization disregarded as an entity separate from its owner within the meaning of section 301.7701-3 of the Treasury Regulations. Merger Sub has not elected, and will not elect, to be classified, with effect as of or prior to the Liquidation, as an association taxable as a corporation pursuant to section 301.7701-3 of the Treasury Regulations.
Upon satisfaction of certain terms and conditions set forth in the Plan at the Effective Time, Predecessor Fund will merge pursuant to applicable state law with and into Merger Sub with Merger Sub surviving and the common shares of the Predecessor Fund will convert into the New Shares. Pursuant to applicable state law and without any further action or deed being required, as of the Effective Time, all the rights, privileges, powers, assets, property and liabilities of Predecessor Fund and Merger Sub will become the rights, privileges, powers, assets, property and liabilities of the Merger Sub and the separate legal existence of Predecessor Fund shall cease for all purposes. The aggregate net asset value as of the Valuation Time (as defined in the Plan) of the New Shares to be received by each Predecessor Fund shareholder (including for this purpose any fractional New Share to which such shareholder would be entitled), in each instance, will be equal to the aggregate net asset value as of the Valuation Time of the Predecessor Fund shares surrendered by such shareholder in the Reorganization. Immediately after the Merger, (i) the former shareholders of the Predecessor Fund will own all the issued and outstanding shares of the Successor Fund and will own such shares solely by reason of their ownership of shares of the Predecessor Fund immediately prior to the Effective Time and (ii) the Merger Sub will own all the assets that had been held by the Predecessor Fund immediately prior to the Effective Time, and such assets shall be subject to all the liabilities of the Predecessor Fund as existed immediately prior to the Effective Time. No fractional New Share will be issued to Predecessor Fund shareholders in connection with the Merger. In lieu thereof, the Successor Fund’s transfer agent, on behalf of the shareholders entitled to receive fractional New Shares, will aggregate all fractional New Shares and sell the resulting whole shares on the NYSE for the account of all shareholders of fractional interests, and each such shareholder will be entitled to a pro rata share of the proceeds from such sale.
There will be no dissenters’ rights of appraisal with respect to the Reorganization under the applicable provisions of state law. Thus, no shareholder of the Predecessor Fund will receive any cash or property in the Reorganization other than New Shares as a result of the conversion of his, her or its shares of the Predecessor Fund and any cash in lieu of fractional New Shares.
Tortoise Power and Energy Infrastructure Fund, Inc.
Tortoise Power and Energy Infrastructure Fund
December 20, 2024
Page 5
As soon as practicable after the Effective Time (including following the Other Mergers), the Merger Sub will dissolve under applicable state law and the Successor Fund will assume all the Merger Sub’s liabilities and obligations, known and unknown, contingent or otherwise, whether or not determinable, and the Merger Sub will distribute to the Successor Fund, which will be the sole member of the Merger Sub at such time, all the assets of the Merger Sub in complete liquidation of its interest in the Merger Sub in accordance with a plan of dissolution adopted by the Merger Sub.
Following the Merger, the Successor Fund (directly or indirectly through Merger Sub) will continue the Predecessor Fund’s historic business in that it will have an investment objective and investment strategies, policies, risks and restrictions substantially similar to those of the Predecessor Fund. In addition, the Successor Fund will use a significant portion of the Predecessor Fund’s historic business assets in its business. Prior to the Effective Time, a portion of the Predecessor Fund’s portfolio will be repositioned solely to eliminate leverage and due to differences in investment policies and strategies between it and the Successor Fund. At least thirty-four percent (34%) of the total fair market value of the Predecessor Fund’s portfolio assets (i) will meet, as of the Effective Time, and (ii) met, at all times beginning two years prior to the date the Board of Directors of the Predecessor Fund approved the Reorganization and at all times thereafter, the investment objective, strategies, policies, risks and restrictions of the Successor Fund. The Predecessor Fund did not alter, and will not alter, its portfolio in connection with the Reorganization to meet this thirty-four percent (34%) threshold. No Fund modified any of its investment objective, strategies, policies, risks or restrictions to permit the Predecessor Fund to meet this thirty-four percent (34%) threshold or in connection with the Reorganization and the Successor Fund has no plan or intention to change any of its investment objective, strategies, policies, risks or restrictions after the Merger.
The purpose and effect of the Reorganization is to change the form of organization of the Predecessor Fund from that of a separate corporation operating as a closed-end management investment company to that of a separate series of the Successor Company operating as an open-end management investment company. The Successor Fund will continue the investment company business of the Predecessor Fund in a substantially unchanged manner. The Successor Fund’s investment objective will be substantially identical to the investment objective of the Predecessor Fund and the Successor Fund’s principal investment strategies will be substantially similar to the principal investment strategies of the Predecessor Fund, except that the Successor Fund will focus on equity securities to a greater degree than the Predecessor Fund and cannot engage in leverage through borrowings and preferred stock. The Successor Fund will not dispose of any assets received from the Predecessor Fund except in the ordinary course of its business as an investment company.
In approving the Merger, the Board of Directors of the Predecessor Fund determined that the Plan and the transactions contemplated thereunder are in the best interests of the Predecessor Fund and the Board of Directors of the Predecessor Fund determined that the interests of the shareholders of the Predecessor Fund will not be diluted as a result of the Reorganization. In making such determinations, the Board of Directors of the Predecessor Fund considered a number of factors as set forth under the heading “The Mergers-C. Information About the Mergers-Background and Board Considerations Relating to the Proposed Mergers” in the Joint Proxy Statement/Prospectus dated November 5, 2024 (the “Proxy Statement”) relating to the Registration Statement (as defined below).
Tortoise Power and Energy Infrastructure Fund, Inc.
Tortoise Power and Energy Infrastructure Fund
December 20, 2024
Page 6
Conclusion
Based on the foregoing, it is our opinion with respect to the Merger (subject to the conditions and limitations set forth above) that the merger under applicable state law of the Predecessor Fund with and into Merger Sub with Merger Sub surviving, in accordance with the terms of the Plan, will qualify as a reorganization under section 368(a) of the Code.
The opinions set forth above (subject to the conditions and limitations set forth above) with respect to (i) the nonrecognition of gain or loss by the Predecessor Fund, the Successor Fund and the Merger Sub, (ii) the basis and holding period of the assets received by the Merger Sub, (iii) the nonrecognition of gain or loss by the Predecessor Fund’s shareholders upon the receipt of the New Shares, except with respect to cash received in lieu of a fractional New Share, and (iv) the basis and holding period of the New Shares received by the Predecessor Fund’s shareholders follow as a matter of law from the opinion that the transfers under the Plan will qualify as a reorganization under section 368(a) of the Code.
The opinions expressed in this letter are based on the Code, the Income Tax Regulations promulgated by the Treasury Department thereunder and judicial authority reported as of the date hereof. We have also considered the positions of the Internal Revenue Service (the “Service”) reflected in published and private rulings. Although we are not aware of any pending changes to these authorities that would alter our opinions, there can be no assurances that future legislative or administrative changes, court decisions or Service interpretations will not significantly modify the statements or opinions expressed herein. We do not undertake to make any continuing analysis of the facts or relevant law following the date of this letter or to notify you of any changes to such facts or law.
Our opinion is limited to those U.S. federal income tax issues specifically considered herein. We do not express any opinion as to any other U.S. federal tax issues, or any state, local or foreign tax law issues, arising from or related to the transactions contemplated by the Plan. Although the discussion herein is based upon our best interpretation of existing sources of law and expresses what we believe a court would properly conclude if presented with these issues, our opinion is not binding on the courts or the Service and no assurance can be given that such interpretations would be followed by the courts or the Service if they were to become the subject of judicial or administrative proceedings.
This opinion is furnished to each Fund solely for its benefit in connection with the Reorganization and is not to be relied upon, for any other purpose, in whole or in part, without our express prior written consent. Shareholders of the Funds may rely on this opinion, it being understood that we are not establishing any attorney-client relationship with any shareholder of either Fund. This letter is not to be relied upon for the benefit of any other person.
Tortoise Power and Energy Infrastructure Fund, Inc.
Tortoise Power and Energy Infrastructure Fund
December 20, 2024
Page 7
We hereby consent to the filing of a form of this opinion as an exhibit to the Registration Statement on Form N-14 (File No. 333-281752) relating to the Reorganization filed by the Successor Company with the Securities and Exchange Commission (the “Registration Statement”), to the discussion of this opinion in the Proxy Statement relating to the Registration Statement and to the use of our name and to any reference to our firm in the Registration Statement and the Proxy Statement. In giving such consent, we do not thereby admit that we are within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder.
| Very truly yours, | |
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| /s/ Vedder Price P.C. | |
| VEDDER PRICE P.C. | |
