[Federal Register Volume 78, Number 244 (Thursday, December 19, 2013)]
[Notices]
[Pages 76889-76892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-30130]


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DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

[Docket ID OCC-2013-0020]

Federal Reserve System

[Docket No. OP-1474]

Federal Deposit Insurance Corporation


Proposed 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.

ACTION: Proposed joint guidance with request for comment.

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SUMMARY: The Agencies are proposing to issue jointly an Addendum 
(Proposed Addendum) to the ``Interagency Policy Statement on Income Tax 
Allocation in a Holding Company Structure'' (63 FR 64757, Nov. 23, 
1998) 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 Proposed Addendum 
would instruct IDIs and their holding companies to review 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 Proposed Addendum includes a sample paragraph that IDIs would 
include in their tax allocation agreements to facilitate the Agencies' 
instructions.

DATES: Comments must be received by January 21, 2014.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to all of the Agencies. You may submit comments, identified by 
``Addendum to the Interagency Policy Statement on Income Tax Allocation 
in a Holding Company Structure'' by any of the following methods:

Office of the Comptroller of the Currency

    Because paper mail in the Washington, DC area and at the OCC is 
subject to delay, commenters are encouraged to submit comments by 
email, if possible. Please use the title ``Proposed Addendum to the 
Interagency Policy Statement on Income Tax Allocation in a Holding 
Company Structure'' to facilitate the organization and distribution of 
the comments. You may submit comments by any of the following methods:
     Web site: Federal eRulemaking Portal--``Regulations.gov'': 
Go to http://www.regulations.gov. Enter ``Docket ID OCC-2013-0020'' in 
the Search Box and click ``Search.''. Results can be filtered using the 
filtering tools on the left side of the screen. Click on ``Comment 
Now'' to submit public comments. Click on the ``Help'' tab on the 
Regulations.gov home page to get information on using Regulations.gov.
     Email: mail to: [email protected].
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Mail Stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
     Hand Delivery: 400 7th Street SW., Suite 3E-218, Mail Stop 
9W-11, Washington, DC 20219.
    Instructions: Because paper mail in the Washington, DC area and at 
the OCC is subject to delay, commenters are encouraged to submit 
comments by the Federal eRulemaking Portal or email, if possible. 
Please use the title ``Addendum to the Interagency Policy Statement on 
Income Tax Allocation in a Holding Company Structure'' to facilitate 
the organization and distribution of the comments. In

[[Page 76890]]

general, OCC will enter all comments received into the docket and 
publish them on the Regulations.gov Web site without change, including 
any business or personal information that you provide such as name and 
address information, email addresses, or phone numbers. Comments 
received, including attachments and other supporting materials, are 
part of the public record and subject to public disclosure. Do not 
enclose any information in your comment or supporting materials that 
you consider confidential or inappropriate for public disclosure. To 
view comments electronically: Go to http://www.regulations.gov. Enter 
``Docket ID OCC-2013-0020'' in the Search box and click ``Search.''. 
Comments can be filtered by agency using the filtering tools on the 
left side of the screen. Click on the ``Help'' tab on the 
Regulations.gov home page to get information on using Regulations.gov, 
including instructions for viewing public comments, viewing other 
supporting and related materials, and viewing the docket after the 
close of the comment period. You may personally inspect and photocopy 
comments at the OCC, 400 7th Street SW., Washington, DC. For security 
reasons, the OCC requires that visitors make an appointment to inspect 
comments. You may do so by calling (202) 649-6700. Upon arrival, 
visitors will be required to present valid government-issued photo 
identification and submit to security screening in order to inspect and 
photocopy comments.

The Board of Governors of the Federal Reserve System

     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include the 
Board's docket number in the subject line of the message.
     Facsimile: (202) 452-3819 or (202) 452-3102.
     Mail: Robert deV. Frierson, Secretary, Board of Governors 
of the Federal Reserve System, 20th Street and Constitution Avenue NW., 
Washington, DC 20551.
     Instructions: All public comments are available from the 
Board's Web site at http://www.federalreserve.gov/apps/foia/proposedregs.aspx as submitted, unless modified for technical reasons. 
Accordingly, your comments will not be edited to remove any identifying 
or contact information. Public comments also may be viewed 
electronically or in paper form in Room MP-500 of the Board's Martin 
Building (20th and C Streets NW.) between 9:00 a.m. and 5:00 p.m. on 
weekdays.

Federal Deposit Insurance Corporation

     Agency Web site: http://www.fdic.gov/regulations/laws/federal/propose.html. Follow instructions for submitting comments on 
the Agency Web site.
     Email: [email protected]. Include ``Addendum to 
Interagency Policy Statement on Income Tax Allocation in a Holding 
Company Structure,'' on the subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand-delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m.
     Instructions: All comments received must include the 
agency name and ``Addendum to Interagency Policy Statement on Income 
Tax Allocation in a Holding Company Structure.'' All comments received 
will be posted without change to http://www.fdic.gov/regulations/laws/federal/propose.html, including any personal information provided. 
Paper copies of public comments may be ordered from the FDIC Public 
Information Center, 3501 North Fairfax Drive, Room E-1002, Arlington, 
VA 22226, by telephone at (877) 275-3342 or (703) 562-2200.

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 
[email protected]; Gary Jeffers, Counsel, Bank Activities and 
Structure Division, Chief Counsel's Office, 202-649-6208 or 
[email protected], 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 [email protected]; Mark G. Flanigan, 
Counsel, Legal Division, 202-898-7426 or [email protected]; Jeffrey E. 
Schmitt, Counsel, Legal Division, 703-562-2429 or [email protected].

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 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.
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    \1\ 63 FR 64757 (Nov. 23, 1998).
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    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 proposing to issue an Addendum to the Interagency Policy Statement 
(Proposed Addendum) to ensure that IDIs in a Consolidated Group 
maintain an appropriate relationship regarding the payment of taxes and 
treatment of tax refunds.

II. Description of Proposed Addendum

    The Proposed 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 Proposed Addendum also would clarify

[[Page 76891]]

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 Proposed Addendum states that, to further the goals of the 
Interagency Policy Statement, IDIs and their holding companies should 
review and ensure that 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 Proposed 
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 Proposed Addendum, and sections 23A and 23B of the FRA.
    The Proposed Addendum also would clarify 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 Proposed Addendum would 
clarify 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 Proposed Addendum would 
incorporate this expectation.

III. Request for Comment

    The Agencies invite comment on all aspects of the Proposed 
Addendum.
    1. What other or additional mechanisms, if any, should the Agencies 
consider to clarify their expectations regarding tax allocation 
agreements between an IDI and any parent holding company?
    2. What modifications, if any, could the Agencies make to the 
Proposed Addendum, including the sample paragraph, that would reduce 
burden on IDIs and their parent holding companies?

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 
Proposed 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 Proposed Addendum.

V. Text of the Proposed Addendum

    The text of the Proposed 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'').\2\ 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.
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    \2\ 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.
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    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 varying conclusions regarding whether tax allocation 
agreements create a debtor-creditor relationship between a holding 
company and its IDI.\3\ 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.\4\ 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.
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    \3\ Case law on this issue is mixed. Compare Zucker v. FDIC, as 
Receiver for BankUnited, 2013 WL 4106387, *6 (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 In re IndyMac Bancorp, Inc., 2012 WL 
1951474, *2 (C.D. Ca. May 30, 2012) (``According to both bankruptcy 
law and California contract law, the [tax allocation agreement in 
question] creates a debtor/creditor relationship.'').
    \4\ See e.g., In re IndyMac Bancorp, Inc., 2012 WL 1951474 (C.D. 
Ca. May 30, 2012).
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    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.\5\ In addition, all 
Consolidated Groups should amend their tax allocation agreements to 
include the following paragraph or substantially similar language:
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    \5\ This Addendum clarifies and supplements but does not replace 
the Interagency Policy Statement.
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    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

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the FRA.\6\ 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.\7\ 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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    \6\ 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).
    \7\ 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: December 9, 2013.
Thomas J. Curry,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System.

    December 12, 2013.
Robert deV. Frierson,
Secretary of the Board.
    By order of the Board of Directors.

    Federal Deposit Insurance Corporation.

    Dated at Washington, DC this 30th day of October, 2013.
Robert E. Feldman,
Executive Secretary.
[FR Doc. 2013-30130 Filed 12-18-13; 8:45 am]
BILLING CODE 4810-33-P;6210-01-P;6714-01-P