Addendum to the Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure, 35228-35230 [2014-14325]

Download as PDF 35228 Federal Register / Vol. 79, No. 118 / Thursday, June 19, 2014 / Notices emcdonald on DSK67QTVN1PROD with NOTICES the system fault no longer exists, the TPMS telltale will no longer flash, and the ‘‘Service TPM System’’ message will no longer display. In addition to the TPMS telltale alerting the operator of a significant loss of tire pressure, or a TPMS malfunction as required, the EVIC messages and owner’s manual provide more than the minimum level of information required aiding the operator’s association of the illuminated telltale with an appropriate response. Chrysler also made reference to a previous petition for inconsequential noncompliance that addressed labeling issues that NHTSA granted. Chrysler has additionally informed NHTSA that it has corrected the noncompliance so that all future production vehicles will comply with FMVSS No. 101. In summation, Chrysler believes that the described noncompliance of the subject vehicles is inconsequential to motor vehicle safety, and that its petition, to exempt Chrysler from providing recall notification of noncompliance as required by 49 U.S.C. 30118 and remedying the recall noncompliance as required by 49 U.S.C. 30120 should be granted. NHTSA notes that the statutory provisions (49 U.S.C. 30118(d) and 30120(h)) that permit manufacturers to file petitions for a determination of inconsequentiality allow NHTSA to exempt manufacturers only from the duties found in sections 30118 and 30120, respectively, to notify owners, purchasers, and dealers of a defect or noncompliance and to remedy the defect or noncompliance. Therefore, any decision on this petition only applies to the subject vehicles that Chrysler no longer controlled at the time it determined that the noncompliance existed. However, any decision on this petition does not relieve vehicle distributors and dealers of the prohibitions on the sale, offer for sale, or introduction or delivery for introduction into interstate commerce of the noncompliant vehicles under their control after Chrysler notified them that the subject noncompliance existed. Authority: (49 U.S.C. 30118, 30120: delegations of authority at 49 CFR 1.95 and 501.8) Jeffrey M. Giuseppe, Acting Director, Office of Vehicle Safety Compliance. [FR Doc. 2014–14285 Filed 6–18–14; 8:45 am] BILLING CODE 4910–59–P VerDate Mar<15>2010 17:25 Jun 18, 2014 Jkt 232001 DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency [Docket ID OCC–2013–0020; Docket No. OP–1474] BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM RIN 7100–AD 87 FEDERAL DEPOSIT INSURANCE CORPORATION Addendum to the Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency, Department of the Treasury (Agencies). ACTION: Final Addendum to Interagency Policy Statement. AGENCY: The Agencies are issuing jointly an Addendum (Addendum) to the ‘‘Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure’’ to ensure that insured depository institutions (IDIs) in a consolidated group maintain an appropriate relationship regarding the payment of taxes and treatment of tax refunds. The Addendum instructs IDIs and their holding companies to review and revise their tax allocation agreements to ensure that the agreements expressly acknowledge that the holding company receives a tax refund from a taxing authority as agent for the IDI and are consistent with certain of the requirements of sections 23A and 23B of the Federal Reserve Act. The Addendum includes a sample paragraph that IDIs could include in their tax allocation agreements to facilitate the Agencies’ instructions. DATES: The Agencies expect institutions and holding companies to implement fully the Addendum to the Interagency Policy Statement as soon as reasonably possible, which the Agencies expect would not be later than October 31, 2014. FOR FURTHER INFORMATION CONTACT: Office of the Comptroller of the Currency: Steven Key, Assistant Director for Bank Activities and Structure, Bank Activities and Structure Division, Chief Counsel’s Office, 202–649–5594 or steven.key@occ.treas.gov; Gary Jeffers, Counsel, Bank Activities and Structure Division, Chief Counsel’s Office, 202– 649–6208 or gary.jeffers@occ.treas.gov, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219. SUMMARY: PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 Board of Governors of the Federal Reserve System: Laurie Schaffer, Associate General Counsel, (202) 452– 2272, Benjamin McDonough, Senior Counsel, (202) 452–2036, Pamela Nardolilli, Senior Counsel, (202) 452– 3289, or Will Giles, Counsel, (202) 452– 3351, Legal Division; or Matthew Kincaid, Sr. Accounting Policy Analyst, (202) 452–2028, Division of Banking Supervision and Regulation, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. Users of Telecommunication Device for Deaf (TDD) only, call (202) 263–4869. Federal Deposit Insurance Corporation: Robert Storch, Chief Accountant, 202–898–8906 or rstorch@ fdic.gov; Mark G. Flanigan, Counsel, Legal Division, 202–898–7426 or mflanigan@fdic.gov; Jeffrey E. Schmitt, Counsel, Legal Division, 703–562–2429 or jschmitt@fdic.gov. SUPPLEMENTARY INFORMATION: I. Background In 1998, the Agencies and the Office of Thrift Supervision issued the ‘‘Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure’’ (Interagency Policy Statement) to provide guidance to insured depository institutions (IDIs) and their holding companies and other affiliates (Consolidated Groups) regarding the payment of taxes on a consolidated basis.1 One of the principal goals of the Interagency Policy Statement is to protect IDIs’ ownership rights in tax refunds, while permitting the Consolidated Group to file consolidated tax returns. The Interagency Policy Statement states that: (1) Tax settlements between an IDI and its holding company should be conducted in a manner that is no less favorable to the IDI than if it were a separate taxpayer; and (2) a holding company receives a tax refund from a taxing authority as agent for the IDI. Since adoption of the Interagency Policy Statement, there have been many disputes between holding companies in bankruptcy and failed IDIs regarding the ownership of tax refunds generated by the IDIs. In these disputes, some courts have found that tax refunds generated by an IDI were the property of its holding company based on certain language contained in their tax allocation agreement that the courts interpreted as creating a debtor-creditor relationship. Accordingly, the Agencies are issuing an Addendum to the Interagency Policy Statement (Addendum) to ensure that IDIs in a 1 63 E:\FR\FM\19JNN1.SGM FR 64757 (November 23, 1998). 19JNN1 Federal Register / Vol. 79, No. 118 / Thursday, June 19, 2014 / Notices Consolidated Group maintain an appropriate relationship regarding the payment of taxes and treatment of tax refunds. emcdonald on DSK67QTVN1PROD with NOTICES II. Description of Addendum The Addendum is intended to clarify and supplement the Interagency Policy Statement to ensure that tax allocation agreements expressly acknowledge an agency relationship between a holding company and its subsidiary IDI to protect the IDI’s ownership rights in tax refunds. The Addendum also clarifies how certain of the requirements of sections 23A and 23B of the Federal Reserve Act (FRA) apply to tax allocation agreements between IDIs and their affiliates. The Addendum states that, to further the goals of the Interagency Policy Statement, IDIs and their holding companies should review and revise their tax allocation agreements to ensure their tax allocation agreements explicitly acknowledge that an agency relationship exists between the holding company and its subsidiary IDIs with respect to tax refunds and do not contain other language to suggest a contrary intent. The Addendum includes a sample paragraph for IDIs and their holding companies to use in their tax allocation agreements, which the Agencies generally would deem to adequately acknowledge that an agency relationship exists for purposes of the Interagency Policy Statement, the Addendum, and sections 23A and 23B of the FRA. The Addendum also clarifies that all tax allocation agreements are subject to the requirements of section 23B of the FRA, and tax allocation agreements that do not clearly acknowledge that an agency relationship exists may be subject to additional requirements under section 23A of the FRA. Moreover, the Addendum clarifies that section 23B of the FRA requires a holding company to promptly transmit tax refunds received from a taxing authority to its subsidiary IDI. The sample paragraph in the Addendum incorporates this expectation. III. Summary of Comments The Agencies issued the Addendum in proposed form with a request for comment (Proposed Addendum) on December 19, 2013.2 The comment period closed on January 21, 2014. The Agencies received two comment letters on the Proposed Addendum—one from an individual who viewed the Proposed Addendum favorably and did not suggest any modifications, and another 2 78 FR 76889 (December 19, 2013). VerDate Mar<15>2010 17:25 Jun 18, 2014 Jkt 232001 from a financial institution trade association, which also did not suggest any modifications to the Proposed Addendum. However, this trade association requested that the Agencies provide institutions until the end of calendar year 2014 to amend their tax allocation agreements, as necessary, to ensure consistency with the Proposed Addendum. This commenter also suggested that this time period is appropriate because the Proposed Addendum will require reviews of existing tax allocation agreements and may require institutions and holding companies to receive board of directors’ approvals to amend both their agreements and internal tax processes. The Agencies understand that institutions and holding companies require time to revise their tax allocation agreements, that some institutions and holding companies may wish to consult with tax counsel, and that more complex banking organizations with multiple subsidiaries and affiliates may require additional time to obtain all required approvals of the members of the Consolidated Group. Accordingly, the Agencies encourage institutions and holding companies to begin promptly the efforts to review and revise their tax allocation agreements. In this regard, the Agencies expect institutions and holding companies to implement fully the Addendum to the Interagency Policy Statement as soon as reasonably possible, which the Agencies expect would not be later than October 31, 2014. The Agencies also received some informal inquiries regarding the applicability of the Addendum to holding companies that have elected S corporation status for federal income tax purposes.3 The Addendum and Interagency Policy Statement concern tax allocation agreements between an IDI, its parent company, and its affiliates. Accordingly, the Addendum and Interagency Policy Statement does not apply to an IDI, its holding company, or other affiliates if the holding company is not subject to corporate income taxes at the federal or state level. 35229 information. The Agencies may not conduct or sponsor, and an organization is not required to respond to, an information collection unless the information collection displays a currently valid Office of Management and Budget control number. There is no collection of information contained in the Addendum. V. Text of the Addendum The text of the Addendum follows: Paperwork Reduction Act In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3506; 5 CFR part 1320, Appendix A.1), the Agencies reviewed the Addendum guidance for any collection of Addendum to Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure In 1998, the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC) (collectively, the Agencies), and the Office of Thrift Supervision (OTS) issued the ‘‘Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure’’ (the ‘‘Interagency Policy Statement’’).4 Under the Interagency Policy Statement, members of a consolidated group, comprised of one or more insured depository institutions (IDIs) and their holding company and affiliates (the Consolidated Group), may prepare and file their federal and state income tax returns as a group so long as the act of filing as a group does not prejudice the interests of any one of the IDIs. That is, the Interagency Policy Statement affirms that intercorporate tax settlements between an IDI and its parent company should be conducted in a manner that is no less favorable to the IDI than if it were a separate taxpayer and that any practice that is not consistent with the policy statement may be viewed as an unsafe and unsound practice prompting either informal or formal corrective action. The Interagency Policy Statement also addresses the nature of the relationship between an IDI and its parent company. It states in relevant part that: • ‘‘[A] parent company that receives a tax refund from a taxing authority obtains these funds as agent for the consolidated group on behalf of the group members,’’ and • A Consolidated Group’s tax allocation agreement should not ‘‘characterize refunds attributable to a subsidiary depository institution that the parent receives from a taxing authority as the property of the parent.’’ Since the issuance of the Interagency Policy Statement, courts have reached 3 S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. 4 63 FR 64757 (Nov. 23, 1998). Responsibilities of the OTS were transferred to the Board, FDIC, and OCC pursuant to Title III of the Dodd-Frank Wall Street Reform and Consumer Protection Act. IV. Administrative Law Matters PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\19JNN1.SGM 19JNN1 35230 Federal Register / Vol. 79, No. 118 / Thursday, June 19, 2014 / Notices varying conclusions regarding whether tax allocation agreements create a debtor-creditor relationship between a holding company and its IDI.5 Some courts have found that the tax refunds in question were the property of the holding company in bankruptcy (rather than property of the subsidiary IDI) and held by the holding company as the IDI’s debtor.6 The Agencies are issuing this addendum to the Interagency Policy Statement (Addendum) to explain that Consolidated Groups should review their tax allocation agreements to ensure the agreements achieve the objectives of the Interagency Policy Statement. This Addendum also clarifies how certain of the requirements of sections 23A and 23B of the Federal Reserve Act (FRA) apply to tax allocation agreements between IDIs and their affiliates. In reviewing their tax allocation agreements, Consolidated Groups should ensure the agreements: (1) Clearly acknowledge that an agency relationship exists between the holding company and its subsidiary IDIs with respect to tax refunds, and (2) do not contain other language to suggest a contrary intent.7 In addition, all Consolidated Groups should amend their tax allocation agreements to include the following paragraph or substantially similar language: emcdonald on DSK67QTVN1PROD with NOTICES 5 Case law on this issue is mixed. Compare Zucker v. FDIC, as Receiver for BankUnited, 727 F.3d 1100, 1108–09 (11th Cir. Aug. 15, 2013) (‘‘The relationship between the Holding Company and the Bank is not a debtor-creditor relationship. When the Holding Company received the tax refunds it held the funds intact—as if in escrow—for the benefit of the Bank and thus the remaining members of the Consolidated Group.’’) with F.D.I.C. v. Siegel (In re IndyMac Bancorp, Inc.), ll F. App’x ll, 2014 WL 1568759, *2 (9th Cir. Apr. 21, 2014) (per curiam) (‘‘The TSA does not create a trust relationship. The absence of language creating a trust relationship is explicitly an indication of a debtor-creditor relationship in California’’). 6 See e.g., F.D.I.C. v. Siegel (In re IndyMac Bancorp, Inc.), ll F. App’x ll, 2014 WL 1568759 (9th Cir. Apr. 21, 2014) (per curiam). 7 This Addendum clarifies and supplements but does not replace the Interagency Policy Statement. VerDate Mar<15>2010 17:25 Jun 18, 2014 Jkt 232001 The [holding company] is an agent for the [IDI and its subsidiaries] (the ‘‘Institution’’) with respect to all matters related to consolidated tax returns and refund claims, and nothing in this agreement shall be construed to alter or modify this agency relationship. If the [holding company] receives a tax refund from a taxing authority, these funds are obtained as agent for the Institution. Any tax refund attributable to income earned, taxes paid, and losses incurred by the Institution is the property of and owned by the Institution, and shall be held in trust by the [holding company] for the benefit of the Institution. The [holding company] shall forward promptly the amounts held in trust to the Institution. Nothing in this agreement is intended to be or should be construed to provide the [holding company] with an ownership interest in a tax refund that is attributable to income earned, taxes paid, and losses incurred by the Institution. The [holding company] hereby agrees that this tax sharing agreement does not give it an ownership interest in a tax refund generated by the tax attributes of the Institution. Going forward, the Agencies generally will deem tax allocation agreements that contain this or similar language to acknowledge that an agency relationship exists for purposes of the Interagency Policy Statement, this Addendum, and sections 23A and 23B of the FRA. All tax allocation agreements are subject to the requirements of section 23B of the FRA, and tax allocation agreements that do not clearly acknowledge that an agency relationship exists may be subject to additional requirements under section 23A of the FRA.8 In general, section 23B requires affiliate transactions to be made 8 Section 23A requires, among other things, that loans and extensions of credit from a bank to its affiliates be properly collateralized. 12 U.S.C. 371c(c). PO 00000 Frm 00083 Fmt 4703 Sfmt 9990 on terms and under circumstances that are substantially the same, or at least as favorable to the IDI, as comparable transactions involving nonaffiliated companies or, in the absence of comparable transactions, on terms and circumstances that would in good faith be offered to non-affiliated companies.9 Tax allocation agreements should require the holding company to forward promptly any payment due the IDI under the tax allocation agreement and specify the timing of such payment. Agreements that allow a holding company to hold and not promptly transmit tax refunds received from the taxing authority and owed to an IDI are inconsistent with the requirements of section 23B and subject to supervisory action. However, an Agency’s determination of whether such provision, or the tax allocation agreement in total, is consistent with section 23B will be based on the facts and circumstances of the particular tax allocation agreement and any associated refund. Dated: May 15, 2014. Thomas J. Curry, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, June 12, 2014. Robert deV. Frierson, Secretary of the Board. By order of the Board of Directors. Federal Deposit Insurance Corporation. Dated at Washington, DC, this 23rd day of May 2014. Robert E. Feldman, Executive Secretary. [FR Doc. 2014–14325 Filed 6–18–14; 8:45 am] BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P 9 12 U.S.C. 371c–1(a). Transactions subject to section 23B include the payment of money by a bank to an affiliate under contract, lease, or otherwise and transactions in which the affiliate acts as agent of the bank. Id. at § 371c–1(a)(2) & (a)(4). E:\FR\FM\19JNN1.SGM 19JNN1

Agencies

[Federal Register Volume 79, Number 118 (Thursday, June 19, 2014)]
[Notices]
[Pages 35228-35230]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14325]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket ID OCC-2013-0020; Docket No. OP-1474]

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

RIN 7100-AD 87

FEDERAL DEPOSIT INSURANCE CORPORATION


Addendum to the Interagency Policy Statement on Income Tax 
Allocation in a Holding Company Structure

AGENCY: Board of Governors of the Federal Reserve System, Federal 
Deposit Insurance Corporation, and Office of the Comptroller of the 
Currency, Department of the Treasury (Agencies).

ACTION: Final Addendum to Interagency Policy Statement.

-----------------------------------------------------------------------

SUMMARY: The Agencies are issuing jointly an Addendum (Addendum) to the 
``Interagency Policy Statement on Income Tax Allocation in a Holding 
Company Structure'' to ensure that insured depository institutions 
(IDIs) in a consolidated group maintain an appropriate relationship 
regarding the payment of taxes and treatment of tax refunds. The 
Addendum instructs IDIs and their holding companies to review and 
revise their tax allocation agreements to ensure that the agreements 
expressly acknowledge that the holding company receives a tax refund 
from a taxing authority as agent for the IDI and are consistent with 
certain of the requirements of sections 23A and 23B of the Federal 
Reserve Act. The Addendum includes a sample paragraph that IDIs could 
include in their tax allocation agreements to facilitate the Agencies' 
instructions.

DATES: The Agencies expect institutions and holding companies to 
implement fully the Addendum to the Interagency Policy Statement as 
soon as reasonably possible, which the Agencies expect would not be 
later than October 31, 2014.

FOR FURTHER INFORMATION CONTACT:
    Office of the Comptroller of the Currency: Steven Key, Assistant 
Director for Bank Activities and Structure, Bank Activities and 
Structure Division, Chief Counsel's Office, 202-649-5594 or 
steven.key@occ.treas.gov; Gary Jeffers, Counsel, Bank Activities and 
Structure Division, Chief Counsel's Office, 202-649-6208 or 
gary.jeffers@occ.treas.gov, Office of the Comptroller of the Currency, 
400 7th Street SW., Washington, DC 20219.
    Board of Governors of the Federal Reserve System: Laurie Schaffer, 
Associate General Counsel, (202) 452-2272, Benjamin McDonough, Senior 
Counsel, (202) 452-2036, Pamela Nardolilli, Senior Counsel, (202) 452-
3289, or Will Giles, Counsel, (202) 452-3351, Legal Division; or 
Matthew Kincaid, Sr. Accounting Policy Analyst, (202) 452-2028, 
Division of Banking Supervision and Regulation, Board of Governors of 
the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551. Users of Telecommunication Device for Deaf (TDD) 
only, call (202) 263-4869.
    Federal Deposit Insurance Corporation: Robert Storch, Chief 
Accountant, 202-898-8906 or rstorch@fdic.gov; Mark G. Flanigan, 
Counsel, Legal Division, 202-898-7426 or mflanigan@fdic.gov; Jeffrey E. 
Schmitt, Counsel, Legal Division, 703-562-2429 or jschmitt@fdic.gov.

SUPPLEMENTARY INFORMATION:

I. Background

    In 1998, the Agencies and the Office of Thrift Supervision issued 
the ``Interagency Policy Statement on Income Tax Allocation in a 
Holding Company Structure'' (Interagency Policy Statement) to provide 
guidance to insured depository institutions (IDIs) and their holding 
companies and other affiliates (Consolidated Groups) regarding the 
payment of taxes on a consolidated basis.\1\ One of the principal goals 
of the Interagency Policy Statement is to protect IDIs' ownership 
rights in tax refunds, while permitting the Consolidated Group to file 
consolidated tax returns. The Interagency Policy Statement states that: 
(1) Tax settlements between an IDI and its holding company should be 
conducted in a manner that is no less favorable to the IDI than if it 
were a separate taxpayer; and (2) a holding company receives a tax 
refund from a taxing authority as agent for the IDI.
---------------------------------------------------------------------------

    \1\ 63 FR 64757 (November 23, 1998).
---------------------------------------------------------------------------

    Since adoption of the Interagency Policy Statement, there have been 
many disputes between holding companies in bankruptcy and failed IDIs 
regarding the ownership of tax refunds generated by the IDIs. In these 
disputes, some courts have found that tax refunds generated by an IDI 
were the property of its holding company based on certain language 
contained in their tax allocation agreement that the courts interpreted 
as creating a debtor-creditor relationship. Accordingly, the Agencies 
are issuing an Addendum to the Interagency Policy Statement (Addendum) 
to ensure that IDIs in a

[[Page 35229]]

Consolidated Group maintain an appropriate relationship regarding the 
payment of taxes and treatment of tax refunds.

II. Description of Addendum

    The Addendum is intended to clarify and supplement the Interagency 
Policy Statement to ensure that tax allocation agreements expressly 
acknowledge an agency relationship between a holding company and its 
subsidiary IDI to protect the IDI's ownership rights in tax refunds. 
The Addendum also clarifies how certain of the requirements of sections 
23A and 23B of the Federal Reserve Act (FRA) apply to tax allocation 
agreements between IDIs and their affiliates.
    The Addendum states that, to further the goals of the Interagency 
Policy Statement, IDIs and their holding companies should review and 
revise their tax allocation agreements to ensure their tax allocation 
agreements explicitly acknowledge that an agency relationship exists 
between the holding company and its subsidiary IDIs with respect to tax 
refunds and do not contain other language to suggest a contrary intent. 
The Addendum includes a sample paragraph for IDIs and their holding 
companies to use in their tax allocation agreements, which the Agencies 
generally would deem to adequately acknowledge that an agency 
relationship exists for purposes of the Interagency Policy Statement, 
the Addendum, and sections 23A and 23B of the FRA.
    The Addendum also clarifies that all tax allocation agreements are 
subject to the requirements of section 23B of the FRA, and tax 
allocation agreements that do not clearly acknowledge that an agency 
relationship exists may be subject to additional requirements under 
section 23A of the FRA. Moreover, the Addendum clarifies that section 
23B of the FRA requires a holding company to promptly transmit tax 
refunds received from a taxing authority to its subsidiary IDI. The 
sample paragraph in the Addendum incorporates this expectation.

III. Summary of Comments

    The Agencies issued the Addendum in proposed form with a request 
for comment (Proposed Addendum) on December 19, 2013.\2\ The comment 
period closed on January 21, 2014. The Agencies received two comment 
letters on the Proposed Addendum--one from an individual who viewed the 
Proposed Addendum favorably and did not suggest any modifications, and 
another from a financial institution trade association, which also did 
not suggest any modifications to the Proposed Addendum. However, this 
trade association requested that the Agencies provide institutions 
until the end of calendar year 2014 to amend their tax allocation 
agreements, as necessary, to ensure consistency with the Proposed 
Addendum. This commenter also suggested that this time period is 
appropriate because the Proposed Addendum will require reviews of 
existing tax allocation agreements and may require institutions and 
holding companies to receive board of directors' approvals to amend 
both their agreements and internal tax processes. The Agencies 
understand that institutions and holding companies require time to 
revise their tax allocation agreements, that some institutions and 
holding companies may wish to consult with tax counsel, and that more 
complex banking organizations with multiple subsidiaries and affiliates 
may require additional time to obtain all required approvals of the 
members of the Consolidated Group. Accordingly, the Agencies encourage 
institutions and holding companies to begin promptly the efforts to 
review and revise their tax allocation agreements. In this regard, the 
Agencies expect institutions and holding companies to implement fully 
the Addendum to the Interagency Policy Statement as soon as reasonably 
possible, which the Agencies expect would not be later than October 31, 
2014.
---------------------------------------------------------------------------

    \2\ 78 FR 76889 (December 19, 2013).
---------------------------------------------------------------------------

    The Agencies also received some informal inquiries regarding the 
applicability of the Addendum to holding companies that have elected S 
corporation status for federal income tax purposes.\3\ The Addendum and 
Interagency Policy Statement concern tax allocation agreements between 
an IDI, its parent company, and its affiliates. Accordingly, the 
Addendum and Interagency Policy Statement does not apply to an IDI, its 
holding company, or other affiliates if the holding company is not 
subject to corporate income taxes at the federal or state level.
---------------------------------------------------------------------------

    \3\ S corporations are corporations that elect to pass corporate 
income, losses, deductions, and credits through to their 
shareholders for federal tax purposes.
---------------------------------------------------------------------------

IV. Administrative Law Matters

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 
3506; 5 CFR part 1320, Appendix A.1), the Agencies reviewed the 
Addendum guidance for any collection of information. The Agencies may 
not conduct or sponsor, and an organization is not required to respond 
to, an information collection unless the information collection 
displays a currently valid Office of Management and Budget control 
number. There is no collection of information contained in the 
Addendum.

V. Text of the Addendum

    The text of the Addendum follows:

Addendum to Interagency Policy Statement on Income Tax Allocation in a 
Holding Company Structure

    In 1998, the Board of Governors of the Federal Reserve System 
(Board), the Federal Deposit Insurance Corporation (FDIC), the Office 
of the Comptroller of the Currency (OCC) (collectively, the Agencies), 
and the Office of Thrift Supervision (OTS) issued the ``Interagency 
Policy Statement on Income Tax Allocation in a Holding Company 
Structure'' (the ``Interagency Policy Statement'').\4\ Under the 
Interagency Policy Statement, members of a consolidated group, 
comprised of one or more insured depository institutions (IDIs) and 
their holding company and affiliates (the Consolidated Group), may 
prepare and file their federal and state income tax returns as a group 
so long as the act of filing as a group does not prejudice the 
interests of any one of the IDIs. That is, the Interagency Policy 
Statement affirms that intercorporate tax settlements between an IDI 
and its parent company should be conducted in a manner that is no less 
favorable to the IDI than if it were a separate taxpayer and that any 
practice that is not consistent with the policy statement may be viewed 
as an unsafe and unsound practice prompting either informal or formal 
corrective action.
---------------------------------------------------------------------------

    \4\ 63 FR 64757 (Nov. 23, 1998). Responsibilities of the OTS 
were transferred to the Board, FDIC, and OCC pursuant to Title III 
of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
---------------------------------------------------------------------------

    The Interagency Policy Statement also addresses the nature of the 
relationship between an IDI and its parent company. It states in 
relevant part that:
     ``[A] parent company that receives a tax refund from a 
taxing authority obtains these funds as agent for the consolidated 
group on behalf of the group members,'' and
     A Consolidated Group's tax allocation agreement should not 
``characterize refunds attributable to a subsidiary depository 
institution that the parent receives from a taxing authority as the 
property of the parent.''
    Since the issuance of the Interagency Policy Statement, courts have 
reached

[[Page 35230]]

varying conclusions regarding whether tax allocation agreements create 
a debtor-creditor relationship between a holding company and its 
IDI.\5\ Some courts have found that the tax refunds in question were 
the property of the holding company in bankruptcy (rather than property 
of the subsidiary IDI) and held by the holding company as the IDI's 
debtor.\6\ The Agencies are issuing this addendum to the Interagency 
Policy Statement (Addendum) to explain that Consolidated Groups should 
review their tax allocation agreements to ensure the agreements achieve 
the objectives of the Interagency Policy Statement. This Addendum also 
clarifies how certain of the requirements of sections 23A and 23B of 
the Federal Reserve Act (FRA) apply to tax allocation agreements 
between IDIs and their affiliates.
---------------------------------------------------------------------------

    \5\ Case law on this issue is mixed. Compare Zucker v. FDIC, as 
Receiver for BankUnited, 727 F.3d 1100, 1108-09 (11th Cir. Aug. 15, 
2013) (``The relationship between the Holding Company and the Bank 
is not a debtor-creditor relationship. When the Holding Company 
received the tax refunds it held the funds intact--as if in escrow--
for the benefit of the Bank and thus the remaining members of the 
Consolidated Group.'') with F.D.I.C. v. Siegel (In re IndyMac 
Bancorp, Inc.), ---- F. App'x ----, 2014 WL 1568759, *2 (9th Cir. 
Apr. 21, 2014) (per curiam) (``The TSA does not create a trust 
relationship. The absence of language creating a trust relationship 
is explicitly an indication of a debtor-creditor relationship in 
California'').
    \6\ See e.g., F.D.I.C. v. Siegel (In re IndyMac Bancorp, Inc.), 
---- F. App'x ----, 2014 WL 1568759 (9th Cir. Apr. 21, 2014) (per 
curiam).
---------------------------------------------------------------------------

    In reviewing their tax allocation agreements, Consolidated Groups 
should ensure the agreements: (1) Clearly acknowledge that an agency 
relationship exists between the holding company and its subsidiary IDIs 
with respect to tax refunds, and (2) do not contain other language to 
suggest a contrary intent.\7\ In addition, all Consolidated Groups 
should amend their tax allocation agreements to include the following 
paragraph or substantially similar language:
---------------------------------------------------------------------------

    \7\ This Addendum clarifies and supplements but does not replace 
the Interagency Policy Statement.
---------------------------------------------------------------------------

    The [holding company] is an agent for the [IDI and its 
subsidiaries] (the ``Institution'') with respect to all matters related 
to consolidated tax returns and refund claims, and nothing in this 
agreement shall be construed to alter or modify this agency 
relationship. If the [holding company] receives a tax refund from a 
taxing authority, these funds are obtained as agent for the 
Institution. Any tax refund attributable to income earned, taxes paid, 
and losses incurred by the Institution is the property of and owned by 
the Institution, and shall be held in trust by the [holding company] 
for the benefit of the Institution. The [holding company] shall forward 
promptly the amounts held in trust to the Institution. Nothing in this 
agreement is intended to be or should be construed to provide the 
[holding company] with an ownership interest in a tax refund that is 
attributable to income earned, taxes paid, and losses incurred by the 
Institution. The [holding company] hereby agrees that this tax sharing 
agreement does not give it an ownership interest in a tax refund 
generated by the tax attributes of the Institution.
    Going forward, the Agencies generally will deem tax allocation 
agreements that contain this or similar language to acknowledge that an 
agency relationship exists for purposes of the Interagency Policy 
Statement, this Addendum, and sections 23A and 23B of the FRA.
    All tax allocation agreements are subject to the requirements of 
section 23B of the FRA, and tax allocation agreements that do not 
clearly acknowledge that an agency relationship exists may be subject 
to additional requirements under section 23A of the FRA.\8\ In general, 
section 23B requires affiliate transactions to be made on terms and 
under circumstances that are substantially the same, or at least as 
favorable to the IDI, as comparable transactions involving 
nonaffiliated companies or, in the absence of comparable transactions, 
on terms and circumstances that would in good faith be offered to non-
affiliated companies.\9\ Tax allocation agreements should require the 
holding company to forward promptly any payment due the IDI under the 
tax allocation agreement and specify the timing of such payment. 
Agreements that allow a holding company to hold and not promptly 
transmit tax refunds received from the taxing authority and owed to an 
IDI are inconsistent with the requirements of section 23B and subject 
to supervisory action. However, an Agency's determination of whether 
such provision, or the tax allocation agreement in total, is consistent 
with section 23B will be based on the facts and circumstances of the 
particular tax allocation agreement and any associated refund.
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    \8\ Section 23A requires, among other things, that loans and 
extensions of credit from a bank to its affiliates be properly 
collateralized. 12 U.S.C. 371c(c).
    \9\ 12 U.S.C. 371c-1(a). Transactions subject to section 23B 
include the payment of money by a bank to an affiliate under 
contract, lease, or otherwise and transactions in which the 
affiliate acts as agent of the bank. Id. at Sec.  371c-1(a)(2) & 
(a)(4).

    Dated: May 15, 2014.
Thomas J. Curry,
Comptroller of the Currency.

    By order of the Board of Governors of the Federal Reserve 
System, June 12, 2014.
Robert deV. Frierson,
Secretary of the Board.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.

    Dated at Washington, DC, this 23rd day of May 2014.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2014-14325 Filed 6-18-14; 8:45 am]
BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P