United States

Tax Concerns Related to Bank Mergers

FINANCIAL INSTITUTIONS INSIGHTS  | 

Under the Internal Revenue Code, there are no fewer than nine different types of reorganizations that permit one corporation to acquire a second corporation in a tax-free (really tax deferred) manner. Other than FDIC-assisted acquisitions, the predominant method of acquisition in the banking industry is the statutory merger. Three types of these mergers exist under the Code, and each has potential taxation issues that could lead to trouble.

Mergers are prevalent in the banking industry due to the tax and business benefits they provide. However, any agreement involving the transfer of large amounts of assets and liabilities should not be considered lightly as trouble spots can arise. With proper planning, potential missteps can be anticipated and frequently eliminated to help the transaction achieve the desired results.

For a comprehensive analysis of specific areas that could lead to taxation issues during a merger, download the white paper The Trouble With Mergers: Tax Concerns Within the Banking Industry.