Bank holding companies typically file consolidated tax returns with their subsidiary depository institutions. In 1998, the Board of Governors of the Federal Reserve System (Board), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) adopted an Interagency Policy Statement on Income Tax Allocation (Policy Statement) regarding the allocation and payment of taxes where the income tax returns are filed on a consolidated basis. The goal of the Policy Statement was to clarify the depository institution's ownership rights in tax refunds. A 2014 addendum encouraged depository institutions in a consolidated group to maintain an appropriate relationship regarding the payment of taxes and treatment of tax refunds. The Policy Statement was strictly guidance, and therefore unenforceable. There is, however, a chance that could change later this year. In April, the Board issued a proposal which will make the principles in the Policy Statement enforceable to ensure tax settlements between the depository institution and its holding company are conducted in a manner that is no less favorable to the depository institution than if the depository institution were a separate taxpayer. Continue reading >