August 2014

Many banks file consolidated U.S. income tax returns with their holding companies. New action by the federal banking regulators requires most of these banks to enter into a new agreement, or revise an existing agreement, regarding tax matters. This must be accomplished no later than October 31, 2014.

In 1998 the federal banking regulators (the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Office of Thrift Supervision) issued the “Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure” (the “1998 Policy Statement”). The 1998 Policy Statement set forth the consensus of the regulators regarding how financial institutions and their holding companies should act when joining together to file consolidated U.S. income tax returns. In addition to setting forth various principles to be followed by financial institutions and their holding companies, the regulators urged that the parties enter into written agreements respecting their arrangement (“Tax Sharing Agreements”).

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