Brussels 1983 meeting

Leasing is essentially an alternative method of financing the use or acquisition of assets. In recent years, the range of assets leased has markedly increased, as has the geographical spread of leasing agreements. Leasing has proved to be extremely flexible; to the lessee it is useful as a form of off-balance-sheet financing; to the manufacturer it is a useful marketing tool. An “operating lease” covers only part of the life of the asset; a “financial lease” is for the whole or most of the asset’s life and is, in effect, similar to financing a purchase.
Tax depreciation allowances are generally available, in the case of an operating lease, to the lessor, and, in the case of a financial lease, to the lessee. But this is not a universal rule. “Double dipping” occurs where the lessor and lessee are in different jurisdictions, and the lessor gets a tax allowance in his country while the lessee gets a tax allowance in his. Belgium, France, Switzerland, Italy and to some extent Denmark and the United Kingdom grant allowances to lessors, and in the United States, Canada, Germany and the Netherlands, allowances may also be available to the lessee. Rules vary from country to country; they have been subject to many changes in recent years and will no doubt continue to be so. Examples of double dipping have included US companies leasing to the Netherlands, Swiss companies leasing into Germany, and Japanese companies leasing into Brazil (where an advantage results from the tax-sparing credits of the tax treaty).

Leverage leasing involves a lessor – typically putting up some 20 – 40% of the cost of the asset and a financier providing the rest of the finance on a non-recourse basis, but the lessor being able to claim tax allowances on 100% of the cost. Outside investors may participate as lessors in such leasing, as a form of tax shelter.

The estate of a deceased person can obtain title to assets situated outside the jurisdiction in which probate of a will is granted only by carrying out the necessary formalities in the foreign jurisdiction. There are certain exemptions, in some countries, for small estates, and there are a few treaties providing for mutual recognition of testamentary documents. But generally, the foreign jurisdiction will require to be satisfied that the will is valid in accordance with the law which governs it. Different countries have different rules for determining which is the relevant law – that of the testator’s domicil, nationality or last residence. There are various formal requirements – for certified or notarised copies of the will, for production of the grant of probate, for a notarial certificate of law, translations of documents, and so on. The procedure can often be lengthy, and expensive.
Some of the inherent problems are solved by the provisions of the Hague Convention or, in some countries, by domestic laws having similar effect. It enables a testator, while in a foreign country, to make a will in conformity with the law of that country: if he makes such a will, disposing of assets in that country, considerable savings in time and costs may be effected.

The bequests contained in his will may conflict with the rights of legitimate portions or similar rights arising under his personal law. Neither the Hague or the Unidroit Conventions apply to questions of this kind – questions of material validity. Such questions may be resolved by reference to the law of the testator’s domicil or nationality or to law of the place in which the property is situated. If the law of the testator’s home country and the law of the situs of the property do not limit rights of testamentary dispositions, the foreign jurisdiction will recognise dispositions of both movable and immovable property. Dispositions of movable property by testators with freedom of testamentary disposition will be recognised even in countries where the law limits testamentary freedom. A joint account or joint ownership may circumvent the need for probate. In some countries, a power of attorney continues to have effect after the death of the donor. A nominee may be useful, or assets in bearer form.

A more radical solution may be found in the establishment in a Thin Trust. This may be revocable and may provide for successors to be named during the settlor’s lifetime. Whether or not a trust can in effect give the settler a testamentary freedom he would not otherwise enjoy, is a difficult question. It is clear that a settlor cannot dispose of assets to which he does not have unencumbered title – e.g. community property. If the trustee was not resident in the jurisdiction where a claim could be made by person entitled to legitimate portion and did not voluntarily submit to that jurisdiction, he would be immune from any action by the claimant.

How is the interpretation of treaties affected by later changes in the domestic law of the parties?
Article 3(2) of the OECD model, both in the 1963 and 1977 versions, provides that terms not defined in the treaty, are to have the meaning they have under the law of the state whose taxes are in question. This leaves open the question, whether a static or ambulatory interpretation is to be applied: is the law that in force at the time, or that from time to time in force? The latter interpretation does not require that later laws override or amend the treaty, but that the treaty always contemplated that later law would be material to its interpretation. This distinction is not made in the judgement of the Canadian Supreme Court in The Queen v Melford Developments Inc (1982) CTC 333, 82 DTC 6281.

This problem arises in defining “the Territory”: the OECD model is silent as to whether this is reference to the territory of the contracting state from time to time, but it seems logical so to interpret it. The phrase “new taxes” is plainly an ambulatory term, and the definitions of “company”, “resident”, “immovable property” and “dividends” seem to require an ambulatory interpretation. The ambulatory interpretation is expressly excluded by the commentary in the definition of interest without reference to internal law (which suggests that, if internal law has been referred to, it would be ambulatory); an ambulatory interpretation seems to be implied in the concepts of “excessive interest and royalties”, of non-discrimination and of the duty to exchange information. In Canada, an ambulatory interpretation has been given to the term “credit”; by contrast, the French authorities do not consider that references to capital taxes in treaties made before the enactment of their wealth tax extend to this new tax.

While subsequent changes may well change the interpretation of an earlier treaty, there must be some limit to the changes which can be so made. Such consideration gives some support for the static interpretation, but a wholly static interpretation imports a number of difficulties – notably that of identifying the date at which the law in force is to be taken as the relevant law.

Rulings in the United States take an ambulatory view. In Canada, the Melford case appears to reach an opposite view, but in that case it seems that the Court did not precisely address itself to that question. The draftsman of the U.K. legislation assumed, on the introduction of corporation tax, that the ambulatory interpretation was to be applied.

Perhaps the true view is that an ambulatory interpretation is in general to be applied, subject to the overriding limitation imposed by the phrase “unless the context otherwise requires”, which is apt to exclude the effect of any radical later changes in domestic law.

Postscript February 1998: Since this lecture was given, the OECD Model was amended in 1995 to clarify that the ambulatory interpretation put forward in the lecture is correct: “As regards the application of the Convention at any time by a Contracting State, any term not defined therein shall, unless the context otherwise requires, have the meaning that it has at that time ….” It will be many years before the revised wording is in general use in treaties. This aspect of the Canadian Melford Developments Inc decision was reversed by the Income Tax Conventions Interpretation Act from 23 June 1983. Knowing precisely when a later change in internal law applies is still as difficult as ever. The Commentary to the OECD Model (paragraphs 12 and 13 of the Commentary to article 3) leaves the matter still open to doubt. The previous paragraph above still seems to state the position correctly.

Two topics are currently of great importance. One is “treaty shopping” – the use of tax treaties by third country residents; the other, “information shopping” – the use of tax treaties to obtain information about taxpayers in third countries.
What the OECD calls the “improper use of conventions” has been much studied by OECD; a first report is awaited in 1984. The United States had included anti-shopping provisions in its model draft of 1977, its discussion draft of 1981 and in its recent acual treaties. The 1980 UK/Netherlands treaty limited the availability of treaty benefits on dividends from UK companies.

The US model treaty provision provides an exception where the transaction does not have the obtaining treaty benefits as a principal purpose: the concept can be difficult to apply in practice. A narrower exemption is provided in the 1981 discussion draft: a treaty partner company may benefit from the treaty only if 75% of its shares are held by residents of the treaty country.

The US/Jamaica treaty introduced the “base erosion” concept (similar to that of the Swiss decree of 1962): the provision gives rise to a number of difficulties of interpretation.

Revenue authorities are bound by the secrecy requirements of domestic law; they can break this secrecy only if the provisions of a treaty or supranational law permit or require them to do so. Revenue authorities have sundry powers to collect information from taxpayers, but this is generally limited to information relating to domestic taxes. Further powers are to be found in the Nordic Convention of 1972, EEC Directive of 1977 and are proposed for inclusion in the European Conventions on Mutual Assistance in Criminal Cases. An unknown amount of information is currently being exchanged by Interfisc – a co-operation between the US, UK, French and German tax authorities. A recent case of information shopping are the Melchers case in the United States and the decision of the BFH in Germany of 12th February 1979.

The trust belongs to the pragmatic tradition of anglo-saxon legal history and is wholly foreign to the concepts of the civil law. Nevertheless, the trust can be seen simply as a contract subject to foreign law: the French Court will actually recognise it, so long as its effect is not contrary to public policy.
An important area in which the provisions of trusts may contravene French public policy is that of inheritance: French law will not recognise a trust to the extent that it purports to take away from the heirs the rights conferred on them by law.

French exchange control may prevent a French resident from creating a trust abroad, but a non-resident trustee may acquire real property or quoted securities in France. A non-resident requires permission for direct investment, but where the investor is a citizen of an EEC country, or a company controlled by EEC interests, consent is not required and a mere notice generally suffices.

So far as tax is concerned, the taxable person in relation to an asset or its income is the “apparent owner”. With trust assets, the trustee will be regarded as the apparent owner. Whether or not a transfer of an asset to a trustee is a donation is a difficult question, since the trustee does not benefit from the transfer and cannot be regarded as an accepting donee for these purposes. Nor may a beneficiary – at least unless and until he becomes absolutely entitled to the trust property – be regarded as a donee.

If a trustee makes a capital gain on the disposal of a French asset, the normal liability to capital gains tax arises. But if the trustee is a company, can it benefit from the long-term capital gains tax rate of 15%? To benefit from this rate, a company must have a permanent establishment in France to which the capital asset is related, and must create a special long-term capital gain reserve: since a foreign corporate trustee will not normally qualify for this rate, its capital gains will be taxed at the standard rate of 50%.

Article 20.9 of the General Tax Code provides that trust income is a form of income from movable property. But the note to the US Treaty issued by the French Revenue indicates that trusts will be regarded as “transparent” – i.e. the beneficiary will be treated as receiving in specie the income earned by the trustees. However so long as trust income is not made available to a beneficiary, the beneficiary will neither be regarded as taxable nor be entitled to any tax credit in respect of it. The “transparency” concept of the note to the US treaty is not consistent with the terms of the General Tax Code. Under the terms of Article 20.9, income from French real property, accruing to a foreign trust and payable to a non-resident beneficiary, should be treated as income from movable property but if the treatment indicated in the note is applied, it will simply be treated as rental income in the hands of the beneficiary.

At the present time, it is difficult to say how the new wealth tax is to apply to trust property. It is especially hard to predict how an interest of a beneficiary under a trust will be valued for wealth tax purposes. A new law may well be necessary to define the liability to wealth tax of trustees and beneficiaries.

International investment is frequently at peril, especially in time of war. A recent example has been the situation created in the United Kingdom and Argentina by the Falklands dispute. Companies are often reluctant to take the requisite precautions – perhaps because of the expense and complexity involved, but more generally in the hope that such measures are not going to be required.
The Swiss government took powers in the mid-50’s to make provision for the economic defence of the country. A Decree of 1957 provided for the protection of assets of companies and other enterprises in the event of military emergency, by permitting the seat of a Swiss company to be transferred either to another part of Switzerland or to the location of the Swiss Government in exile or to any pre-selected place. The transfer is not permanent, but has effect only during the emergency. It is triggered automatically by the declaration of the emergency or invasion of the country.

The decision to make the prospective transfer may be taken by the directors, without reference to the shareholders; it must be notarised and lodged with a “special registry” in Bern (a registry not open to public inspection). The powers of management at the old location remain so far as is necessary to protect the assets of the company in Switzerland.

After the transfer, the company becomes subject to the law of the new jurisdiction as regards its dealings with third parties, but Swiss law continues to apply to the internal affairs of the company. The company may appoint in advance Special Representatives, on whom the power of the directors will devolve; directors who escape to the new jurisdiction retain their powers. Provision is made in the Decree for the appointment of Commissaires to participate in shareholders’ decisions if insufficient shareholders are represented at the new location.

Destinations for the company are limited to countries whose legislation recognises such a transfer. Requisite legislation exists in Panama, Netherlands Antilles, Nauru, Turks and Caicos, Vannatu and – in its most elaborate form — in the Province of New Brunswick.

Another 1957 Decree enables a special register of shareholders to be created in duplicate – at the existing seat of the company and at the intended seat abroad. Furthermore, certificates which fall into enemy hands may be cancelled by the board or Special Representatives, and new certificates issued to the shareholders.

There is also the possibility for the company to grant an irrevocable general power of attorney to a person abroad to manage the affairs of the company for the duration of the emergency, or of creating outside Switzerland trusts of the company’s movable assets – provided that the trusts are designed only to take care of military emergency (and not, for example, revolution) and take effect only for the duration of the emergency. A committee of management may be created to carry on the business on behalf of the trustees. The trust becomes irrevocable during the emergency and any trustee resident in occupied territory is automatically disqualified.

Independently of the legislation concerned with wartime conditions, if a company has transferred its seat and is registered abroad, its registration can be cancelled in Switzerland, so long as all its liabilities have been met. In such a case, the same tax consequences follow as those of a liquidation – i.e. the revaluation of stock in trade and the 35% tax on the distribution of the company’s reserves. This may be used by shareholders who want the company to leave the country for whatever reason – economic, political or other.

The established tax havens continue much as they have done in the last two decades and appear to do a volume of business unexpected in the present state of the world economy. A feature of recent years has been the efforts of the less-established havens to attract a share of this business.
These efforts have consisted principally of the enactment of new legislation. In 1981, no fewer than five statutes came from the Cook Islands, a scattered group of islands in the Pacific Ocean. These represented a conscious effort on the part of Government to provide within that jurisdiction a tax-free enclave in which non-residents can establish companies, particularly those doing an international banking or insurance business. Further legislation is to follow, relating to partnerships and trusts.

In the Turks and Caicos Islands – a rather less scattered group in the Caribbean, at the southernmost tip of the Bahamas archipelago – laws passed by their legislature between 1979 and 1981 opened the way to the now very considerable use of this zero-tax territory as a jurisdiction for company incorporation. In 1977, the island of Anguilla, which is within sight of the Dutch/French territory of St. Maarten (St. Martin) in the Caribbean, suspended its income tax laws, and in the last few years has attracted a measure of company incorporation business. Further south Antigua is making a renewed effort to attract offshore business, with a new International Business Corporations Act running to 373 sections and 2 schedules.

These new havens cannot claim to have local expertise comparable to that of Bermuda and, latterly, the Cayman Islands in insurance, or to that of the Bahamas in banking, but they have the advantage that they need to be, and to a large extent succeed in being, competitive both in terms of service and in terms of cost.

But even the more established havens have been polishing their statute books, to make their jurisdictions attractive to the offshore user. Jersey is in the process of enacting a new Trust Law, which will clear away the uncertainties surrounding the concept of the trust in that island. The Commonwealth of the Bahamas is actively promoting the use of its Merchant Shipping Act of 1979, and even Bermuda, whose position in this market could hardly be more secure, has updated its company law with an Act of 1981. Most recently, Gibraltar has passed legislation enabling foreign companies to register as Exempt Companies and further legislation is expected there to give exempt companies the option of paying tax at a low rate and to give legal effect to the practice of exempting from tax the foreign income of trusts established for non-resident beneficiaries.

Cyprus has carried this activity into the international field: after enacting its offshore legislation between 1975 and 1977, it has concluded five further tax treaties, and more are under negotiation.

At the same time, governments in the offshore territories are concerned – and understandably so – not to attract business of an undesirable kind. The recent laws relating to insurance, which have emerged from Bermuda, Cayman, Jersey and the Isle of Man, have an avowedly regulatory purpose, as do new banking regulations in Cayman, and new laws requiring registration of trusts and auditing of business profits in Liechtenstein, and it may be predicted that the legislation likely to emerge from the tax havens – both old and new – in the next few years, will be less expansive and more restrictive in nature than that of the late 70″s and the early part of this decade.

A tax shelter is not an artificial scheme, but a real investment, offering the risk of loss as well as profit, which provides tax incentives to an individual and/or corporate taxpayers as an inducement to make that investment. They appear to be more widely sold in common-law countries than in civil law countries. High marginal tax rates, the skills of tax planners, the eclipse of avoidance schemes, and government encouragement of particular forms of investment, are factors which have led to the growth of tax shelters. They have met with opposition from Revenue authorities in various countries, and sometimes the web of anti-avoidance provisions surrounding investment incentives have sometimes made the incentives ineffective.
The object of a tax shelter may be deferral – e.g. the commodity straddle. There is an additional advantage in deferral where the value of the currency is declining. Some shelters seek in effect to turn income into capital, others to create losses, generate tax-free income (e.g. municipal bonds in the United States), or to obtain capital allowances (especially on a leveraged investment).

The study of a country’s shelters gives great insight into the practical working of the country’s tax system; it can indicate investment opportunities in that country or suggest the use of similar investments as a shelter in another country. The foreign investor may find that an investment in another country may afford a shelter not only from that country’s tax but from tax in his own country. “Double-dipping” is one example of this phenomenon.

Structures utilised as tax shelters include direct investment, corporations (when fiscally transparent), limited and general partnerships, life policies and trusts. They take advantage of depreciation, special allowances, deductions and tax credits available to specific types of enterprise, leveraging (often within limits, and bearing in mind that non-recourse borrowing does not always give rise to an increase in basis for tax write-off) and the accelerated allowability of losses.

The taxpayer has to bear in mind that a shelter which achieves deferral gives rise to taxable income in a future year. He must measure the returns on his proposed investment against other sheltered investment and also against that of unsheltered investment.

Areas of sheltered investment include oil, gas, energy, coal, real estate, equipment leasing, films, video, cable television, master recording, art, books, gold mining, farming, horse breeding, timber, research and development, commodity straddling, futures and options trading, life assurance, pensions and industry captive insurance.

Currency management may in theory aim at a symmetrical tax treatment: either gains on currency movements should be taxable, and interest and losses deductible, or these items should not come into account for tax at all, (i.e. because the entity concerned is a pension fund or charity or located in a tax haven). In practice, a currency manager will make certain predictions which may or may not turn out to be correct. He should be satisfied that the proposed transactions, if they reach the conclusion predicted, will have the optimum tax effect, but if they have different results any tax disadvantage will be minimised.
A useful measure of movement of currencies is the “Purchasing Power Parity” index, which shows the extent to which a country’s exchange rate has risen or fallen in a way which is not explained by movements in relative prices. Interest rates are affected by expected (rather than historical) exchange rate changes.

Interest rates should logically allow for inflation, but in the decade down to 1980 true interest rates were generally negative – though the loss varied considerably between currencies.

In the Marine Midland case in the United Kingdom, the Court of Appeal has held that the loss on the repayment of the company’s dollar borrowing should be allowed against the profit on the disposal of its dollar assets, but the view of the House of Lords is yet to come. In the United States, the Hoover company lost money on hedging expected sterling losses: its losses were not allowable, though any profit would probably have been taxable. In Australia, the Avco company had net gains on exchange in each of four years and exchange losses in the two subsequent years. The Revenue argued that the profits were taxable on trading profits but that the losses should be unrelieved.

Where a corporate treasurer feels able to take a view about future movement of interest rates, exchange rates and inflation rates, his tax planning will be based on a maximisation of profits in low-tax jurisdictions and a maximisation of charges on income (e.g. interest) in high-tax jurisdictions. The United Kingdom and United States are more permissive than the Netherlands in allowing deduction of interest, but the correct structure for a loan requires careful consideration in each case. Where a company can claim no relief for capital losses on long-term borrowing, it should borrow the most “expensive” currency in terms of interest. At the same time, the currency risk may be hedged by the acquisition of low-interest-bearing currency by a tax haven subsidiary.

Taxable property includes every right and interest in every asset. These require to be reviewed on lst January every year. Partial exemption is applied to woodlands, total exemption to works of art and to antiques over 100 years old. The first 3 million francs (to be adjusted for inflation) is exempt; the rates thereafter are progressive. Rates on business assets are lower than the rates on private assets. The tax is expressed to be related to market value: this is by no means easy to ascertain in practice. Assets of husband and wife are aggregated (“wife” including any woman with whom a man shares his life).
In principle, no distinction is made between residents and non-residents, but non-residents are subject to the tax only by reference to their assets situated in metropolitan France and its overseas departments, and they may deduct debts only to the extent that these relate directly to French property. Non-residents are not taxable on their “placements financiers” – i.e. bank accounts, loans and shares, but “participations” – i.e. shareholdings of more than 10% of the share capital of a company, and holdings of a value of over 10 million francs – are taxable. In principle, the tax applies only to individuals, but a foreign company is taxable if it is primarily invested in French land.

Companies incorporated in “tax havens” are taxable persons. For these purposes, a “tax haven” is any country with which France does not have a tax treaty including an article concerning the mutual assistance for pursuing fiscal fraud. The law looks through “personnes interposees” – nominees and other screen entities. Companies which are resident in treaty countries are not taxable, unless they can be seen as a vehicle for a French resident.

The treaty definition of “residence” is applied for wealth tax purposes, but where a non-resident is subject to a wealth tax in his home country, he may still suffer double wealth tax on French assets. This problem will require changes in the treaties to which France is a party: a start has been made with the Swiss treaty.

The wealth tax is not primarily a revenue-raising tax; its more important effect is to give the Revenue authorities information about the affairs of wealthy taxpayers – information which make it possible for the Revenue to collect other taxes more effectively.

Belgium offers the possibility of the creation of employment or co-ordination centres. This has been made possible by the Royal Decrees of 23rd and 30th December 1982: companies qualifying under these Decrees have a ten-year tax holiday, and their employees require no work permits, nor are any social security contributions required in respect of their employment.
Certain areas are to be specified, in which Belgian companies, engaged in new industrial or service enterprises in certain high-technology industries, will be entitled to these privileges. They must employ at least ten and not more than 200 people, within two years, and for the whole of the ten year period.

A co-ordination centre, may be established by a new Belgian company or a new branch of a foreign company. It must undertake for the group to which it belongs publicity, insurance, scientific research, government relations, centralisation of administration or computer facilities or financial management. The capital and reserves of the group must be not less than 1 billion Belgian francs, nor its turnover less than 10 billion.

The exemption does not cover payments to non-executive directors or to unknown persons, nor abnormal or non-arms-length payments to other members of the group. Exempt enterprises are also exempt from property tax and from withholding tax on royalties (though the recipient is taxable on them at a quarter of the normal rate).

Since the mid-60’s, special provisions have been in force to encourage the employment of foreign executives in Belgium. For 1983 and subsequent years, new regulations are awaited. It is expected that the employer will be entitled to reimburse certain employers’ expenses without tax liability. The regime will apply to foreign nationals with special expertise who have their centre of economic interests abroad but are engaged to work in Belgium for a limited period. They will be taxed only by reference to that proportion of their remuneration which is earned in Belgium; the cost of establishing a place of residence in Belgium, of educating children in Belgium, and of an annual visit (for himself and his family) to his place of permanent residence, will be excluded from his remuneration, and free of tax accordingly.

At the time of the Conference, the end of this story depended upon the outcome of the election in the United Kingdom.
The Inland Revenue entered into what was called “consultation” with the public in proposing new provisions to counter what they called “International Tax Avoidance”. This is a question presently agitating tax departments in many countries, and the international organisations have convened meetings and produced papers on it. The belief is prevalent that every receipt whether of a capital or income nature – should bear tax somewhere.

As regards the United Kingdom, the problem itself is hard to identify: the consultative documents seemed more concerned to propose “solutions” – the nature of the problems being ascertainable only by inference.

The abolition of exchange control in October 1979 made possible a free movement of funds from the United Kingdom. Some limitations on movement of companies and company business is imposed by s 482 of the Income and Corporation Taxes Act (reproducing legislation of the early 50s). The sanctions imposed by the section are fines and even imprisonment, though no conviction is known to have occurred. The Inland Revenue were advised that the section was not consistent with the provisions of the Treaty of Rome, and felt themselves vulnerable to moves by companies to cause profits to arise outside the UK tax net – e.g. by moving their residence to zero-tax or low-tax jurisdictions. A change of residence, if it did nothing else, would free a company from liability to advance corporation tax, and enable it to receive interest from UK bank deposits or UK government securities free of tax, and to dispose of capital assets without suffering tax on its capital gains.

The cases on company residence lay some emphasis on the place where the direction hold their meetings. Since directions could easily meet outside the United Kingdom, the way would, in the event that s 482 were repealed or proved ineffective, be open to large-scale tax avoidance. The Revenue therefore proposed that the test of residence should be the place of effective management. It has been pointed out that the place of directors’ meetings is by no means the sole and determining factor in ascertaining the residence of a company; eventually, the proposal to re-define the concept has been abandoned, and the Revenue have said that they will issue a Statement of Practice, clarifying their views.

The Revenue proposed that the profits of subsidiaries in “tax havens” should be consolidated, for UK tax purposes, with those of its parent. They at first declined to draw up a list of countries which were to be regarded as tax havens – or “privileged tax regimes” – for these purposes, but eventually did so. Exceptions were to be made for companies which made acceptable distributions, or had a genuine trading presence in the foreign country, or could show absence of tax avoidance motive. It appears that these proposals will be carried into law, but it is too early to say precisely what form they will take.