7.	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.

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. Holding Units in AllianceBernstein’s consolidated rabbi trust are not treated as outstanding for purposes of calculating Holding’s ownership interest in AllianceBernstein.

	Three Months Ended March 31,
	2014			2013			% Change
	(in thousands)

Net income attributable to AllianceBernstein Unitholders	$	116,725		$	114,516			1.9	%
Multiplied by: weighted average equity ownership interest		35.4	%		37.5	%
Equity in net income attributable to AllianceBernstein Unitholders	$	41,371		$	42,997			(3.8	)

AllianceBernstein qualifying revenues	$	499,129		$	482,586			3.4
Multiplied by: weighted average equity ownership interest for calculating tax		29.3	%		27.7	%
Multiplied by: federal tax		3.5	%		3.5	%
Federal income taxes		5,112			4,666
State income taxes		100			100
Total income taxes	$	5,212		$	4,766			9.4

Effective tax rate		12.6	%		11.1	%

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.