6. Income Taxes

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, 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,
	2013					2012					2011
	(in thousands)

UBT statutory rate	$	7,490		4.0	%	$	2,832		4.0	%	$	(2,623	)	4.0	%
Federal tax on partnership gross business income		19,944		10.7			19,348		27.3			27,275		(41.6	)
State income taxes		466		0.3			374		0.6			412		(0.6	)
Credit for UBT paid by AllianceBernstein		(7,490	)	(4.0	)		(2,832	)	(4.0	)		2,623		(4.0	)
Income tax expense and effective tax rate	$	20,410		11.0		$	19,722		27.9		$	27,687		(42.2	)

Holding’s income tax is computed by multiplying certain AllianceBernstein qualifying revenues (primarily U.S. investment advisory fees and brokerage commissions) by Holding’s ownership interest in AllianceBernstein, multiplied by the 3.5% tax rate. Since the fourth quarter of 2012, Holding Units in AllianceBernstein’s consolidated rabbi trust have not been treated as outstanding for purposes of calculating Holding’s ownership interest in AllianceBernstein, which lowered income tax expense in 2012 and 2013.

	Years Ended December 31,									% Change
	2013			2012			2011				2013-12		2012-11
	(in thousands)

Net income (loss) attributable to AllianceBernstein Unitholders	$	517,676		$	188,916		$	(174,768	)		174.0	%	n/m
Multiplied by: weighted average equity ownership interest		35.9	%		37.5	%		37.5	%
Equity in net income (loss) attributable to AllianceBernstein Unitholders	$	185,912		$	70,807		$	(65,581	)		162.6		n/m

AllianceBernstein qualifying revenues	$	2,041,642		$	1,930,154		$	2,082,133			5.8		(7.3	)%
Multiplied by: weighted average equity ownership interest for calculating tax		27.9	%		28.7	%		37.5	%
Multiplied by: federal tax		3.5	%		3.5	%		3.5	%
Federal income taxes		19,944			19,348			27,275
State income taxes		466			374			412
Total income taxes	$	20,410		$	19,722		$	27,687			3.5		(28.8	)

In order to preserve Holding’s status as a “grandfathered” PTP 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” PTP, 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, 2013 and 2012. 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 2010. Currently, there are no examinations in progress and to date we have not been notified of any future examinations by applicable taxing authorities.