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 September 30,									Nine Months Ended September 30,
	2014			2013			% Change			2014			2013			% Change
	(in thousands)

Net income attributable to AllianceBernstein Unitholders	$	139,798		$	99,948			39.9	%	$	392,958		$	335,178			17.2	%
Multiplied by: weighted average equity ownership interest		35.7	%		34.5	%					35.6	%		36.7	%
Equity in net income attributable to AllianceBernstein Unitholders	$	49,876		$	34,504			44.6	%	$	139,714		$	122,941			13.6	%

AllianceBernstein qualifying revenues	$	548,319		$	502,423			9.1	%	$	1,581,456		$	1,496,177			5.7	%
Multiplied by: weighted average equity ownership interest for calculating tax		29.4	%		27.9	%					29.4	%		27.9	%
Multiplied by: federal tax		3.5	%		3.5	%					3.5	%		3.5	%
Federal income taxes		5,642			4,901						16,267			14,631
State income taxes		100			80						300			280
Total income taxes	$	5,742		$	4,981			15.3	%	$	16,567		$	14,911			11.1	%

Effective tax rate		11.5	%		14.4	%					11.9	%		12.1	%

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.