7.	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.

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.

	Three Months Ended March 31,
	2015			2014			% Change
	(in thousands)

Net income attributable to AB Unitholders	$	141,469		$	116,725			21.2	%
Multiplied by: weighted average equity ownership interest		36.5	%		35.4	%
Equity in net income attributable to AB Unitholders	$	51,616		$	41,371			24.8

AB qualifying revenues	$	544,774		$	499,129			9.1
Multiplied by: weighted average equity ownership interest for calculating tax		31.1	%		29.3	%
Multiplied by: federal tax		3.5	%		3.5	%
Federal income taxes		5,927			5,112
State income taxes		104			100
Total income taxes	$	6,031		$	5,212			15.7

Effective tax rate		11.7	%		12.6	%

In order to preserve AB Holding’s status as a “grandfathered” PTP for federal income tax purposes, management ensures 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.