Company: REE
Filing Date: 2025-05-15
Form Type: 20-F
Source: 0001628280-25-025661
Chunk: 137

Company: REE Automotive Ltd.
Filing Date: 2025-05-15
Form: 20-F
Item: Item 10
Chunk 137
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 corporation for U. S. federal income tax purposes under Section 7874 of the Code.

Utilization of 10X Capital’s Tax Attributes and Certain Other Adverse Tax Consequences to REE and REE’s Shareholders.

Following the acquisition of a U. S. corporation by a foreign corporation, Code Section 7874 can limit the ability of the acquired U. S. corporation and its U. S. affiliates to use U. S. tax attributes (including net operating losses and certain tax credits) to offset U. S. taxable income resulting from certain transactions, as well as result in certain other adverse tax consequences, even if the acquiring foreign corporation is respected as a foreign corporation for purposes of Code Section 7874.

Based upon the terms of the Merger and the rules for determining share ownership under Section 7874 of the Code and the Section 7874 Regulations, 10X Capital and REE expect that the limitations and other rules described above are not expected to apply to REE or 10X Capital after the Merger.

If the above rules were to apply, REE and certain of REE’s shareholders may be subject to adverse tax consequences including, but not limited to, restrictions on the use of tax attributes with respect to “inversion gain” recognized over a 10-year period following the transaction, disqualification of dividends paid from preferential “qualified dividend income” rates, and the requirement that any U. S. corporation owned by REE include as “base erosion payments” that may be subject to a minimum U. S. federal income tax any amounts treated as reductions in gross income paid to certain related foreign persons. Furthermore, certain “disqualified individuals” (including officers and directors of a U. S. corporation) may be subject to an excise tax on certain stock-based compensation at a rate of 20%. However, as a blank check company whose assets are primarily comprised of cash and cash equivalents, it is not expected that 10X Capital will have a significant amount of inversion gain as a result of the Merger.

There can be no assurance that the IRS will not challenge whether REE is subject to the above rules or that such a challenge would not be sustained by a court. If the IRS successfully applied these rules to REE, significant adverse tax consequences could result for REE and for certain REE shareholders, including a higher effective corporate tax rate on REE U. S. Holders.

U. S. Federal Income Tax Consequences of the Ownership and Disposition