Tax allocation agreement revision required by Oct. 31

Addendum to Interagency Policy Statement encourages review of and revisions to tax allocation agreements by Oct. 31.

In June 2014, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation (collectively, the Agencies) issued an addendum to the “Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure” (Interagency Policy Statement). 

The addendum requires insured depository institutions (IDIs) in a consolidated group maintain an appropriate relationship regarding the payment of taxes and treatment of tax refunds. The purpose of the addendum is to clarify language contained in tax allocation agreements to avoid future legal disputes. There were several disputes in court between holding companies in bankruptcy and failed IDIs concerning the ownership of tax refunds generated by the IDIs. In some cases, courts ruled tax refunds generated by an IDI were the property of its holding company based on language in the tax allocation agreement. The language was interpreted as creating a debtor-creditor relationship.

Changes to tax allocation agreements

The addendum instructs IDIs and their holding companies to review and, if necessary, revise their tax allocation agreements to ensure the tax allocation agreement:

  • Expressly states that the holding companies are acting as agents for the IDIs with respect to tax refunds; and
  • Are consistent with certain requirements of sections 23A and 23B of the Federal Reserve Act.

The addendum also includes a sample paragraph that IDIs may include in their tax allocation agreements to facilitate the Agencies’ instructions. 


The Agencies expect IDIs and holding companies to implement fully the addendum to the Interagency Policy Statement as soon as reasonably possible, but no later than Oct. 31, 2014.


It is anticipated that the Agencies will be examining tax allocation agreements for compliance with the addendum. Therefore, we recommended IDIs and holding companies revisit their tax allocation agreements to ensure they meet all requirements of the Interagency Policy Statement, as well as the addendum.

For more information on reviewing your current tax allocation agreement for compliance, guidance on the implications to the holding company and the IDI, or to learn how Baker Tilly banking specialists can help, contact our team.