• For example , a qualified user may show approval of rates charged for use of the managed property by expressly approving such rates or a general description of the methodology for approving such rates , or by requiring that the service provider charge rates that are reasonable and customary as specifically determined by , or negotiated with , an independent third party ( e . g ., an insurance company or valuation company ).
Risk of Loss over Managed Property
The qualified user must bear the risk of loss upon damage or destruction of the managed property . In meeting this requirement , it is acceptable for the qualified user to insure against risk of loss through a third party or by imposing upon the service provider penalties for failure to operate the property in accordance with the management contract .
No Inconsistent Tax Positions
The service provider must agree that it is not entitled to and will not take any tax position that is inconsistent with being a service provider with respect to the managed property . Thus , the management contract should provide that the service provider will not claim any depreciation or amortization deduction , investment tax credit , or deduction for any rent payment with respect to the managed property .
No Circumstances Substantially Limiting Exercise of Rights
Finally , the service provider must not have any role or relationship with the qualified user that substantially limits the qualified user ’ s ability to exercise its rights under the management contract . For this purpose , a service provider will not be treated as having such a role or relationship if :
• No more than 20 % of the voting power of the governing body of the qualified user is vested in the directors , officers , shareholders , partners , members , and employees of the service provider ;
• The governing body of the qualified user does not include the chief executive officer of the service provider or the chairperson of the service provider ’ s governing body ; and
• The chief executive officer of the service provider is not the chief executive officer of the qualified user or any of the qualified user ’ s related parties .
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