Skip to main content

  • AddRemove
  • Build a Report 
Legal Update

US Banking Regulators Issue Additional Guidance Regarding Tax Allocation Agreements in Holding Company Structures

20 June 2014
Mayer Brown Legal Update

US banking regulators (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency) have issued final joint supplemental guidance (Guidance) regarding tax allocation agreements involving holding companies and their insured depository institution subsidiaries. The June 19, 2014, Guidance is virtually identical to proposed guidance issued in December, 2013.

The Guidance is a response to recent litigation involving holding companies in bankruptcy and their failed depository institutions; some courts have concluded that tax refunds generated by the depository institution and held by the holding company pursuant to the tax allocation agreement were property of the holding company.

It supplements a 1998 interagency policy statement on income tax allocations issued by the regulators that states, among other things, that a holding company that receives a tax refund from a taxing authority obtains these funds as agent for its subsidiary insured depository institutions and other affiliates. The Guidance supplements the policy statement by instructing insured depository institutions and their holding companies to review their tax allocation agreements to ensure the agreements expressly acknowledge that the holding company receives any tax refunds as an agent and that they do not contain other language that suggests a contrary intent. In addition, all banking organizations are instructed to insert specific language, an example of which is included in the Guidance, in their tax allocation agreements to further clarify tax refund ownership.

The Guidance also highlights application of sections 23A and 23B of the Federal Reserve Act, which establish certain restrictions on, and requirements for, transactions between depository institutions and their affiliates, to tax allocation agreements. For example, the Guidance suggests  that if tax allocation agreements do not contain the required agency language, a bank subsidiary could be deemed to have extended credit to its holding company, triggering the numerical limitations and collateral requirements of section 23A. Similarly, the Guidance notes that an agreement would likely violate the “arms length” requirements of section 23B if it did not require the holding company to “promptly” transmit tax refunds attributable to the depository institution subsidiary to that subsidiary.

Institutions and holding companies should implement the Guidance as soon as reasonably possible, which the regulators expect would not be later than October 31, 2014.


  • Scott A. Anenberg
    T +1 202 263 3303
  • Hayden D. Brown
    T +1 704 444 3512
  • J. Paul Forrester
    T +1 312 701 7366

The Build a Report feature requires the use of cookies to function properly.  Cookies are small text files that are placed on your computer by websites that you visit. They are widely used in order to make websites work, or work more efficiently.  If you do not accept cookies, this function will not work.  For more information please see our Privacy Policy

You have no pages selected. Please select pages to email then resubmit.