Income Taxes

AB Holding is a “grandfathered” publicly-traded partnership (“PTP”) for federal tax purposes and, accordingly, is not subject to federal or state corporate income taxes. However, AB Holding is subject to the 4.0% New York City unincorporated business tax (“UBT”), net of credits for UBT paid by AB, and to a 3.5% federal tax on partnership gross income from the active conduct of a trade or business. AB Holding’s partnership gross income is derived from its interest in AB.

AB Holding’s income tax is computed by multiplying certain AB qualifying revenues (primarily U.S. investment advisory fees and brokerage commissions) by AB Holding’s ownership interest in AB, multiplied by the 3.5% tax rate. AB Holding Units in AB’s consolidated rabbi trust are not treated as outstanding for purposes of calculating AB Holding’s ownership interest in AB.



	Three Months Ended September 30,								Nine Months Ended September 30,
	2015			2014			% Change		2015			2014			% Change
	(in thousands)								(in thousands)
Net income attributable to AB Unitholders	$	134,976		$	139,798		(3.4	)%	$	425,539		$	392,958		8.3	%
Multiplied by: weighted average equity ownership interest	36.3		%	35.7		%			36.4		%	35.6		%
Equity in net income attributable to AB Unitholders	$	48,988		$	49,876		(1.8	)	$	155,013		$	139,714		11.0

AB qualifying revenues	$	572,391		$	548,319		4.4		$	1,682,390		$	1,581,456		6.4
Multiplied by: weighted average equity ownership interest for calculating tax	30.8		%	29.4		%			30.9		%	29.4		%
Multiplied by: federal tax	3.5		%	3.5		%			3.5		%	3.5		%
Federal income taxes	6,167			5,642					18,171			16,267
State income taxes	134			100					346			300
Total income taxes	$	6,301		$	5,742		9.7		$	18,517		$	16,567		11.8

Effective tax rate	12.9		%	11.5		%			11.9		%	11.9		%

In order to preserve AB Holding’s status as a “grandfathered” PTP for federal income tax purposes, management seeks to ensure that AB Holding does not directly or indirectly (through AB) enter into a substantial new line of business. If AB Holding were to lose its status as a “grandfathered” PTP, it would be subject to corporate income tax, which would reduce materially AB Holding’s net income and its quarterly distributions to AB Holding Unitholders.