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Intercompany Income Tax Allocation Agreements

FIL-30-2014
June 19, 2014

Intercompany Income Tax Allocation Agreements

Addendum to Policy Statement

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Summary:

The federal banking agencies have approved an addendum that supplements and clarifies the 1998 Interagency Policy Statement on Income Tax Allocation in a Holding Company Structure (Interagency Policy Statement). The agencies are issuing the addendum to ensure that insured depository institutions (IDIs) in a consolidated group maintain an appropriate relationship regarding the payment of taxes and the treatment of tax refunds.

Statement of Applicability to Institutions Under $1 Billion in Total Assets: This Financial Institution Letter applies to all FDIC-supervised banks and savings associations, including community institutions, that (together with a parent holding company) file tax returns as members of a consolidated group.

Highlights:

Since the adoption of the 1998 Interagency Policy Statement, disputes have occurred between holding companies in bankruptcy and failed IDIs regarding the ownership of tax refunds generated by the institutions.
The addendum to the Interagency Policy Statement is intended to ensure that tax allocation agreements explicitly acknowledge that an agency relationship exists between a holding company and its subsidiary institution with respect to tax refunds attributable to the institution.
- The addendum directs institutions and their holding companies to review their agreements to ensure they achieve this objective with respect to tax refunds, and they do not contain other language to suggest a contrary intent.
- The addendum also includes a sample paragraph for institutions and their holding companies to use in their tax allocation agreements.
In addition, the addendum clarifies how certain requirements of Sections 23A and 23B of the Federal Reserve Act apply to tax allocation agreements.
The agencies expect institutions and holding companies to implement fully the addendum to the Interagency Policy Statement as soon as reasonably possible, which the agencies expect would not be later than October 31, 2014.
The addendum and the Interagency Policy Statement do not apply to an institution, its holding company, or other affiliates if the holding company is not subject to corporate income taxes at the federal or state level.

FTC Requests Public Comments on SCI’s Application to Approve Sale of Cemetery Assets in Maryland to Parkwood Memorial Association, Inc.

The Federal Trade Commission is currently accepting public comments on an application by Service Corporation International (SCI) to sell certain funeral and cemetery assets, as required under the FTC’s December 2013 proposed order settling charges that SCI’s acquisition of Stewart Enterprises, Inc. would be anticompetitive. In total, the proposed order requires the combined SCI/Stewart to divest 53 funeral homes and 38 cemeteries to ensure competition is maintained in 59 communities throughout the United States.

In the current application, SCI has petitioned the FTC to approve the divestiture of the business that includes the Parkwood Cemetery in Baltimore, Maryland, to Parkwood Memorial Association, Inc., which is owned in equal part by Guy N. Saxton and John L. Yeatman. Previously, on May 6, 2014, SCI filed an application seeking Commission approval of the proposed divestiture of Hillcrest Memorial Gardens in Annapolis, Maryland, and Pleasant View Memory Gardens in Kearneysville, West Virginia, to acquirers also owned by Saxton and Yeatman.

According to SCI’s current application, the Association, which was formed by Saxton and Yeatman to acquire the assets, will be a strong and effective competitor in the local market, and has the expertise to successfully operate the business it plans to acquire.

The Commission will decide whether to approve the proposed divestiture after expiration of a 30-day public comment period. Public comments may be submitted until July 17, 2014. Written comments should be sent to: FTC Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580. Comments can also be submitted electronically. Copies of the application can be found on the FTC’s website and as a link to this press release. (FTC File No. 131-0163, Docket No. C-4423; the staff contact is Elizabeth A. Piotrowski, Bureau of Competition, 202-326-2623)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., SW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Approves Final Order Settling Charges That Ardagh’s Proposed Acquisition of Saint-Gobain Would Be Anticompetitive; Approves Ardagh’s Application to Sell Six Glass Plants and Related Assets

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that Ardagh Group SA’s $1.7 billion proposed acquisition of Saint-Gobain Containers, Inc. would likely harm competition in the markets for glass containers sold to beer brewers and spirits distillers.

The FTC’s administrative complaint, issued in July 2013, alleged that the proposed acquisition would concentrate most of the $5 billion U.S. glass container industry in two companies – the newly combined Ardagh/Saint-Gobain and Owens-Illinois, Inc. If the merger had proceeded as proposed, these two companies would have controlled about 85 percent of the glass container market for brewers and 77 percent of the market for distillers, reducing competition and likely leading to higher prices for customers buying glass containers for beer or spirits.

In settling the FTC’s complaint, Ardagh agreed to sell six of the manufacturing plants and related assets it acquired through its 2012 acquisition of Anchor Glass Container Corporation, along with Anchor’s former corporate headquarters in Tampa, Fla. The six plants are located in Elmira, N.Y.; Jacksonville, Fla.; Warner Robins, Ga.; Henryetta, Okla.; Lawrenceburg, Ind.; and Shakopee, Minn.

In a separate action also announced today, the Commission approved Ardagh’s application to sell the six manufacturing plants and related assets to Glass Container Acquisition LLC, an affiliate of KPS Capital Partners L.P., as required under the now final settlement order.

The Commission vote approving the final consent order and a letter to the member of the public who commented on it was 3-1-1, with Commissioner Joshua Wright voting no and Commissioner Terrell McSweeny not participating. The vote approving the proposed divestitures also was 3-1-1, with Commissioner Joshua Wright voting no and Commissioner Terrell McSweeny not participating. (Docket No. D-9356; the staff contacts are Catharine Moscatelli, Bureau of Competition, 202-326-2749; and Daniel P. Ducore, Bureau of Competition, 202-326-2526)

Court Order Bars Credit Repair Company from Misleading Credit Bureaus, Charging Consumers Up-Front Fees for Its Services

A Texas-based company owned and operated by a husband and wife team has agreed to settle Federal Trade Commission charges that it violated federal law by lying to consumer reporting agencies, often referred to as “credit bureaus,” and charging consumers up-front fees before providing its services. The court order settling the FTC’s complaint for civil penalties, which was filed by the U.S. Department of Justice, bars the defendants from similar conduct in the future, imposes a $2.35 million civil penalty, and requires them to pay $400,000.

“The Credit Repair Organizations Act protects both individual consumers and the integrity of the credit reporting system,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “The FTC will take action against unscrupulous credit repair companies whether they violate CROA by deceiving consumers or by lying to credit bureaus.”

In its complaint, filed in October 2011, the FTC charged that RMCN Credit Services, Inc. and its owners, Doug and Julie Parker, violated CROA by charging up-front fees for a six-month program to improve consumers’ credit ratings and by making numerous false statements to credit bureaus disputing the accuracy of negative information in consumers’ credit reports. In letters to credit bureaus designed to appear as if they were from consumers, but which RMCN did not show consumers, the firm typically disputed all negative information in credit reports, regardless of the information’s accuracy.

The FTC alleged RMCN, one of the nation’s largest credit repair companies, continued to send these deceptive dispute letters to credit bureaus even after the company received detailed billing histories or signed contracts from creditors proving the credit reports were accurate. RMCN also falsely told consumers that federal law allowed it to dispute accurate credit report information, and that credit bureaus must “prove it or remove it.” It also charged consumers up to $2,000 before providing any service.

The court order, to which the defendants have agreed, bars RMCN and its owners from violating any provision of CROA, and specifically from making untrue or misleading statements to consumer reporting agencies and charging consumers advance fees for credit repair services. The order prohibits defendants from sending letters to consumer reporting agencies or creditors unless consumers review and attest to the accuracy of the letters. It also requires RMCN to send letters to all existing customers notifying them of the FTC’s suit and offering them a right to cancel their contract with RMCN and owe no money to the company. In addition, the order prohibits defendants from making misrepresentations regarding the sale of any goods or services to consumers, including the sale of financial-related products or services.

The order imposes a $2.35 million civil penalty against the defendants, which will be partially suspended based on an inability to pay, after they tender a total of $400,000, in two installments, within nine months of when the court enters the order. Finally, for 10 years the company must submit reports to the FTC to ensure it is complying with the terms of the order.

Information for Consumers

Additional information for consumers is available regarding credit repair and repairing your own credit on the FTC’s website.

The Commission vote approving the proposed court order was 5-0. The Department of Justice filed the proposed consent decree on behalf of the Commission in the U.S. District Court for the Eastern District of Texas, Sherman Division on June 18, 2014, and it is subject to court approval. The order settles all charges against RMCN Credit Services, Inc. and Doug and Julie Parker, individually and as officers of the corporation.

NOTE: Settlement orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

FTC Testifies Before Senate Commerce Subcommittee on Agency Efforts to Combat Fraudulent and Deceptive Claims for Weight-Loss Products

The Federal Trade Commission testified before Congress about its ongoing efforts to combat fraudulent and deceptive claims for weight-loss products through law enforcement, media outreach, and consumer education.

Testifying on behalf of the FTC before the Committee on Commerce, Science, and Transportation, Subcommittee on Consumer Protection, Product Safety, and Insurance, Mary Engle, Associate Director for Advertising Practices at the Federal Trade Commission, said that amid an ongoing obesity epidemic – in which nearly 70 percent of U.S. adults are obese or overweight – the FTC’s most recent fraud study shows that more consumers were victims of fraudulent weight-loss claims than of any other specific fraud type covered by the survey.

The testimony also noted that despite consumer spending of $2.4 billion on weight-loss products and services last year, there is very little evidence that pills or supplements alone will cause sustained, meaningful weight loss – without changes to diet and lifestyle. According to the testimony, consumers are especially susceptible to weight-loss fraud, there is an enormous amount of money to be made in the diet industry, and fraudsters will continue to gravitate toward the money.

“The endless flood of unfounded claims being made in the weight-loss industry vividly illustrates the challenges we, and consumers, are up against,” the testimony stated.

The FTC’s program to combat fraud in the weight-loss industry includes:

Law enforcement: In the past 10 years, the FTC has brought 82 weight-loss-related law enforcement actions, and since 2010, it has collected nearly $107 million for consumer restitution. Early this year, the agency announced Operation Failed Resolution, targeting new weight-loss fads that include food additives, human hormones, skin creams and acai berries.

The Commission has also noted several disturbing developments in weight-loss advertising:

reliance on proprietary studies using erroneous or fabricated data.
marketers capitalizing on weight-loss fads propelled to popularity by trusted spokespeople such as one recent FTC case involving marketers of the Pure Green Coffee dietary supplement. Within weeks of an April 2012 Dr. Oz Show touting green coffee bean extract, these marketers were making overblown claims about the supplement online, such as, “lose 20 pounds in four weeks” and “lose 20 pounds and two to four inches of belly fat in two to three months.”

Media Outreach: To combat the promotion of fraudulent weight-loss products in respected media outlets, the FTC recently issued a “Gut Check” reference guide that advises media outlets on seven claims in weight-loss ads that experts say simply cannot be true and that should cause media outlets to think twice about running the ads.

Consumer Education: Recent FTC brochures, articles, and blog posts geared toward consumers hammer home the message that the only thing they will lose is money if they fall for ads promising quick weight loss without diet or exercise. The FTC also has created teaser websites designed to reach people who are surfing online for weight-loss products.

Today, the agency is also launching a new consumer video and game – the FTC Weight Loss Challenge. The Challenge is an interactive game designed to help consumers think critically about weight-loss products and claims. Available in English and Spanish, the game separates fact from fiction in ads for products touting fast weight loss without the need for diet and exercise.

The Commission vote approving the testimony and its inclusion in the formal record was 5-0.

FTC Launches Contest at DEF CON 22 to Help Track Down Perpetrators of Illegal Robocalls

The Federal Trade Commission is looking to expand the technological arsenal that can be used in the battle against illegal phone spammers by challenging DEF CON 22 attendees to build the ultimate “honeypot” to lure in and identify perpetrators of illegal robocalls. A robocall honeypot is an information system designed to attract robocallers, which can help experts and law enforcement authorities understand and combat illegal calls.

Zapping Rachel of Cardholder Services, showing a female silhouette with insect face and antennae

The new FTC challenge, called “Zapping Rachel”, will consist of three stand-alone contests hosted Aug 7-10, 2014, at one of the world’s oldest and largest hacker conferences. This challenge is another step in the FTC’s ongoing campaign against illegal, prerecorded telemarketing calls. In 2012, the agency hosted its first public robocall challenge, which garnered nearly 800 submissions, and stimulated the market to produce new robocall blocking technologies for consumers.

The Commission isn’t the first federal agency to tap the hacking community for technical solutions. Just last month, the White House supported the second annual National Day of Civic Hacking.

Complete rules will be posted to Challenge.gov in advance of the contest.

If consumers receive a robocall, they should report it to the Commission’s Do Not Call Complaint Assistant. For consumer tips and more information about the agency’s enforcement efforts against telemarketing scams, see www.ftc.gov/robocalls.

Operators of Massive Mobile Cramming Scheme Will Surrender More Than $10M in Assets in FTC Settlement

The operators of a massive mobile cramming scheme have agreed to surrender more than $10 million in assets to settle Federal Trade Commission charges, including the contents of numerous bank accounts; real estate in Los Angeles, Beverly Hills and Chicago; and a number of cars and pieces of jewelry.

“Cramming unauthorized charges on consumers’ phone bills is unlawful, and this settlement shows the FTC is committed to making sure that anyone who does it won’t be able to keep their ill-gotten gains,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Consumers have the right to know what they are being charged.”

Under the terms of the settlement, Lin Miao and the corporate defendants will be permanently banned from placing any charges on consumers’ phone bills, making any misrepresentations to consumers about a product or service or a consumers’ obligation to pay, and will also be prohibited from charging consumers for a product or service without their express consent. The settlement includes a monetary judgment of more than $150 million, which is partially suspended based on Miao’s inability to pay the full amount after he turns over nearly all of his and the companies’ assets.

Among the assets Miao and the corporate defendants will be required to surrender under the terms of the settlement are:

the contents of 14 bank accounts and one life insurance policy, less $5,000;
five real estate properties, including three in Chicago and one in each in Los Angeles and Beverly Hills;
four vehicles, including a 2013 Mercedes SUV, a 2014 Range Rover SUV, a 2011 Audi and a 2008 Bentley; and
numerous items of jewelry, including three Patek Phillippe watches, a Tiffany watch, two Tiffany rings with 10 and eight carat diamonds, a pair of six-carat Tiffany earrings, and a Tiffany necklace, bracelet and diamond bracelet.

The FTC filed its complaint against Miao, along with the corporate defendants Tatto, Inc., Shaboom Media, LLC, Bune, LLC, Mobile Media Products, LLC, Chairman Ventures, LLC, Galactic Media, LLC, and Virtus Media, LLC, in December 2013.

The complaint alleged that Miao and the other defendants pitched text message services offering “love tips,” “fun facts,” and celebrity gossip alerts, but placed charges for these services – typically $9.99 a month – on consumers’ bills without their permission — a practice known as mobile cramming. They also allegedly used deceptive websites designed to collect consumers’ mobile phone numbers that would then be billed for the services.

The charges appeared on consumers’ phone bills under confusing names such as “77050IQ12CALL8663611606” and “25184USBFIQMIG” and in many instances, consumers did not notice the variations in the amount of their bills from month to month. When consumers did notice the charges and attempted to seek refunds, the process was often highly cumbersome, with some promised refunds from the defendants never arriving, or consumers receiving only partial refunds from their phone company.

The Commission vote approving the proposed stipulated order was 5-0. The FTC filed the proposed order in the U.S. District Court for the Central District of California, and it was entered by the court on June 11, 2014.

NOTE: Stipulated orders have the force of law when approved and signed by the District Court judge.

Scammers Settle FTC Charges They Sent Millions of Spam Text Messages

Two affiliate-marketing scammers and their company have agreed to settle Federal Trade Commission charges that they sent millions of unwanted text messages to consumers across the U.S. with false promises of $1,000 gift cards to retailers like Best Buy, Target and Walmart.

Under the terms of their settlement with the FTC, Scott A. Dalrymple of Pennsylvania and Robert Jerrold Wence of Texas, who operated a company called Advert Marketing, Inc., will be permanently banned from sending unwanted or unsolicited commercial text messages or assisting others in doing so. In addition, the two will also be prohibited from misrepresenting to consumers whether a product is “free,” whether they have won a prize or been selected for a gift, or other behavior related to the nature of the scam.

Dalrymple, Wence and Advert Marketing were among the defendants named in the FTC’s 2013 enforcement sweep against text message spammers and affiliate marketers who used false promises of free gift cards to draw consumers into websites that asked them to provide credit card information to sign up for trial offers.

The settlement contains a monetary judgment for $4.2 million, which is partially suspended due to the defendants’ inability to pay. Under the terms of the settlement, Dalrymple and Wence will be required to pay $15,000 each to the Commission, and will be required to destroy any consumer data they may have collected while conducting the text message spam operation.

The Commission vote approving the proposed stipulated final judgment was 5-0. The FTC filed the proposed stipulated final judgment in the U.S. District Court for the Southern District of Texas, Houston Division, and the Court entered the stipulated final judgment on June 10, 2014.

NOTE: Stipulated final judgments have the force of law when approved and signed by the District Court judge.

Payment Processor Agrees to Give Up More Than $1 Million to Settle FTC Charges it Assisted, Facilitated Telemarketing Scammers

A payment processing company agreed to pay or relinquish $1.1 million to settle Federal Trade Commission charges under the Telemarketing Sales Rule (TSR) that it knowingly assisted and facilitated a credit card interest rate reduction scam that bilked tens of thousands of consumers out of a total of nearly $10 million.

Independant Resources Network Corp., doing business as IRN Payment Systems (IRN), agreed to a settlement of $3.48 million, which is suspended upon payment of $400,000. IRN also released any claim to approximately $700,000 in reserve funds that the court previously ordered it to turn over under the asset freeze provisions of a preliminary injunction order that was entered before IRN was named as a defendant in the case.

In January 2013, the FTC filed a complaint to stop a telemarketing scam operated by Innovative Wealth Builders, Inc. (IWB) and its principals, who falsely promised consumers that they could reduce the interest rates on their credit cards and save them thousands of dollars on their debts. For most of the time that IWB operated its scam, IRN was its exclusive payment processor.

In June 2013, the FTC sued IRN in an amended complaint alleging that IRN facilitated IWB’s scheme when IRN knew, or consciously avoided knowing, key facts about the illegal conduct of IWB’s telemarketing scam in violation of the TSR, and chose to continue profiting from processing IWB’s credit card transactions. Payment processors enable merchants to charge consumers’ credit cards for products and services, and in exchange are paid for each payment transaction the merchant processes.

The stipulated order prohibits IRN from the following: payment processing for clients that sell any debt relief product or service; payment processing for certain clients engaged in certain types of businesses (such as collection agency, credit card protection service, lead source providers, money making systems – get rich quick, mortgage loan modification, or outbound telemarketing) without conducting reasonable upfront screening and ongoing monitoring; and assisting or facilitating any client they know, or should know, is making misrepresentations to consumers or engaged in unauthorized billing of consumer accounts.

The Commission vote approving the stipulated order was 5-0. The stipulated order was entered and approved on June 10, 2014 by the U.S. District Court for the Middle District of Florida.

FTC Proposes Improvements to Energy Labels for Consumers

The Federal Trade Commission is seeking public comment on a variety of proposed changes to its Energy Labeling Rule affecting labels for light bulbs, appliances, room air conditioners, ceiling fans, refrigerators, and furnaces.

Under the Rule, manufacturers must attach yellow EnergyGuide labels to certain products, stating an annual operating cost and an energy consumption rating, and a range for comparing the highest and lowest energy consumption for all similar models. The labels appear on clothes washers, dishwashers, refrigerators, freezers, water heaters, room air conditioners, central air conditioners, furnaces, boilers, heat pumps, pool heaters, and televisions.

In March 2012, as part of its systematic review of all FTC rules and guides, the agency sought public comments on proposed improvements to the labeling requirements under the Rule. In January 2013, the FTC issued final amendments to streamline data reporting and improve online disclosures, and proposed new labels to help consumers comparison shop for refrigerators and clothes washers under new Department of Energy test procedures. In July 2013, it issued final amendments for those issues, and updates to comparability ranges.

The FTC now seeks comments on several proposed amendments for expanded light bulb label coverage, an online label database, more durable labels for appliances, room air conditioner labels on boxes, improved ceiling fan labels, consolidated ranges on refrigerator labels, and updates to furnace labels.

For more information about EnergyGuide labels, read Shopping for Home Appliances? Use the EnergyGuide Label.

The Commission vote approving the Federal Register Notice was 5-0. It is available on the FTC’s website and as a link to this press release and will be published in the Federal Register soon. Instructions for filing comments appear in the Federal Register Notice. Comments must be received by August 18, 2014. All comments received will be posted at www.ftc.gov/policy/public-comments. (FTC File No. R611004; the staff contact is Hampton Newsome, Bureau of Consumer Protection, 202-326-2889)

Intercompany Income Tax Allocation Agreements

Addendum to Policy Statement

Printable Format:

Summary:

Highlights:

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