Bank Regulators Require Changes To Tax Allocation Agreements

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Acting in response to divergent results in recent court decisions, the Federal bank regulatory agencies have adopted an Addendum to their longstanding rules regarding income tax allocation agreements between insured depository institutions (“IDI”) and their parent holding companies. The Addendum requires holding companies and their IDI subsidiaries to review their existing income tax allocation agreements and to add a specified provision. The review and modifications must be effected as soon as reasonably possible, which the regulators expect to be prior to October 31, 2014.

Background -

Most banks and thrift institutions holding deposits insured by the Federal Deposit Insurance Corporation (“FDIC”) are subsidiaries in a holding company structure. The Federal and State income tax returns of these IDI, as members of a consolidated group, are usually filed by the holding company parent. Refunds and other tax benefits of the consolidated group attributable to the IDI subsidiaries received by a parent holding company must be allocated to the IDI subsidiaries.

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Topics:  Bank Holding Company, Banks, FDIC, IDIs, Income Taxes, Subsidiaries, Tax Allocation Agreements

Published In: Business Organization Updates, General Business Updates, Finance & Banking Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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