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.

The principal reasons for the difference between AB Holding’s effective tax rates and the UBT statutory tax rate of 4.0% are as follows:



	Years Ended December 31,
	2016					2015					2014
	(in thousands)
UBT statutory rate	$	9,576		4.0	%	$	8,403		4.0	%	$	8,037		4.0	%
Federal tax on partnership gross business income	22,342			9.3		23,845			11.4		22,131			11.0
State income taxes	461			0.2		475			0.2		332			0.2
Credit for UBT paid by AB	(9,576		)	(4.0	)	(8,403		)	(4.0	)	(8,037		)	(4.0	)
Income tax expense and effective tax rate	$	22,803		9.5		$	24,320		11.6		$	22,463		11.2

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.



	Years Ended December 31,									% Change
	2016			2015			2014			2016-15		2015-14
	(in thousands)
Net income attributable to AB Unitholders	$	673,358		$	579,927		$	563,861		16.1	%	2.8	%
Multiplied by: weighted average equity ownership interest	35.6		%	36.2		%	35.6		%
Equity in net income attributable to AB Unitholders	$	239,389		$	210,084		$	200,931		13.9		4.6

AB qualifying revenues	$	2,143,858		$	2,214,077		$	2,153,317		(3.2	)	2.8
Multiplied by: weighted average equity ownership interest for calculating tax	29.8		%	30.8		%	29.4		%
Multiplied by: federal tax	3.5		%	3.5		%	3.5		%
Federal income taxes	22,342			23,845			22,131
State income taxes	461			475			332
Total income taxes	$	22,803		$	24,320		$	22,463		(6.2	)	8.3

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.

The effect of a tax position is recognized in the financial statements only if, as of the reporting date, it is “more likely than not” to be sustained based solely on its technical merits. In making this assessment, a company must assume that the taxing authority will examine the tax position and have full knowledge of all relevant information. We have no liability for unrecognized tax benefits as of December 31, 2016 and 2015. A liability for unrecognized tax benefits, if required, would be recorded in income tax expense and affect the company’s effective tax rate.

We are no longer subject to federal, state and local income tax examinations by tax authorities for any year prior to 2013. Currently, there are no examinations in progress and to date we have not been notified of any future examinations by applicable taxing authorities.