6. Income Taxes

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

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

	Years Ended December 31,
	2012					2011					2010
	(in thousands)

UBT statutory rate	$	2,832		4.0	%	$	(2,623	)	4.0	%	$	6,489		4.0	%
Federal tax on partnership gross business income		19,722		27.9			27,687		(42.2	)		28,059		17.3
Credit for UBT paid by AllianceBernstein		(2,832	)	(4.0	)		2,623		(4.0	)		(6,489	)	(4.0	)

Income tax expense and effective tax rate	$	19,722		27.9		$	27,687		(42.2	)	$	28,059		17.3

	Years Ended December 31,									% Change
	2012			2011			2010			2012-11			2011-10
	(in thousands)

Net income (loss) attributable to AllianceBernstein Unitholders	$	188,916		$	(174,768	)	$	442,419			n/m			n/m
Multiplied by: weighted average equity ownership interest		37.5	%		37.5	%		36.7	%
Equity in net income (loss) attributable to AllianceBernstein Unitholders	$	70,807		$	(65,581	)	$	162,217			n/m			n/m

AllianceBernstein qualifying revenues	$	1,930,154		$	2,082,133		$	2,173,712			(7.3	)%		(4.2	)%
Multiplied by: weighted average equity ownership interest for calculating tax		28.7	%		37.5	%		36.7	%
Multiplied by: federal tax		3.5	%		3.5	%		3.5	%
Income taxes	$	19,722		$	27,687		$	28,059			(28.8	)		(1.3	)

Holding's income tax is computed by multiplying certain AllianceBernstein qualifying revenues (primarily U.S. investment advisory fees and SCB LLC commissions) by Holding's ownership interest in AllianceBernstein, multiplied by the 3.5% tax rate. For computing the federal tax liability paid by Holding for 2011 and prior, Holding Units held by AllianceBernstein in its consolidated rabbi trust were treated as outstanding for purposes of calculating Holding's ownership interest in AllianceBernstein. Effective with the 2012 tax year, Holding Units in AllianceBernstein's consolidated rabbi trust will not be treated as outstanding for purposes of calculating Holding's ownership interest in AllianceBernstein. This change resulted in a 28.7% weighted average ownership interest in 2012, as compared to a 37.5% interest in 2011. This reduction in the ownership percentage reduced Holding's income tax expense by $6.0 million in 2012. Although Holding incurred an equity loss on its equity method holding in AllianceBernstein during 2011, Holding had income tax expense as a result of the income tax computation being based on certain AllianceBernstein revenues.

In order to preserve Holding's status as a "grandfathered" publicly-traded partnership for federal income tax purposes, management ensures that Holding does not directly or indirectly (through AllianceBernstein) enter into a substantial new line of business. If Holding were to lose its status as a "grandfathered" publicly-traded partnership, it would be subject to corporate income tax, which would reduce materially Holding's net income and its quarterly distributions to 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. Accordingly, we have no liability for unrecognized tax benefits as of December 31, 2012 and 2011. 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 all years prior to 2009. Currently, there are no examinations in progress and to date we have not been notified of any future examinations by applicable taxing authorities.