Your Tax Sharing Agreement needs to be compliant by October 31, 2014.

Tax Sharing Agreements

If your bank has a holding company and you have elected to file tax returns as a consolidated group, you should have an agreement between the bank and the holding company that, among other things, establishes the bank’s ownership rights in tax refunds generated by the bank. In our January 2014 Client Alert, we informed you that the federal banking agencies published a proposal calling for institutions to update their tax sharing agreements accordingly.

On June 13, the federal banking agencies issued final supplemental guidance requiring institutions to review and revise their tax sharing agreements to specifically clarify the agency relationship between the holding company and the bank vis-a-vis tax refunds, and cautions institutions that tax sharing agreements must comply with applicable affiliate transaction requirements. The federal banking agencies expect banks and their holding companies to implement the new guidance as soon as possible, but no later than October 31, 2014.

Institutions should take this opportunity to revisit their tax sharing agreements to ensure that their agreements are tailored to their specific circumstances and contain appropriate tax provisions and updates as required by the new regulatory guidance.

Resources

As with any new guidelines, implementation of the required changes and thorough planning for their impact will take time. We urge you to begin the process of understanding how these changes will impact your organization.