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Tax Response to the Dodd-Frank Wall Street Reform
Wall Street reform and related financial regulation designed to prevent the US taxpayer from having to "bail out" another financial crisis is now a reality. The Federal Deposit Insurance Corporation (FDIC) recently issued proposed regulations implementing its new Orderly Liquidation Authority (OLA), under which the FDIC can seize and liquidate large systemically important financial institutions when their collapse threatens the US economy. Taxand US looks at the FDIC's recently issued requirement and the three steps to meet it:
Step 1: Determine if you are employed at one of the chosen 124 SIFIs
Step 2: Develop a Chapter 11 plan and run scenarios developed by the team in charge of preparing it
Step 3: Report findings to the CFO and board of directors prior to submitting to the FDIC. (If not ready, go back to step 2.)
If your company is a SIFI, become familiar with the Dodd-Frank legislation and relevant regulations. Begin to think of tax issues relating to capital, liquidity and leverage triggers that are more closely managed by senior financial management.
It is important to connect with the Dodd-Frank team in your organisation. Tax has always been a value driver and, to some extent, a significant portion of a SIFI's capital. That value has to be modelled and managed in new and unimaginable ways in the Dodd-Frank world.
Don't wait assuming that these rules don't apply to you. Be proactive and understand the resolution plans and what impact they might have on tax capital and liquidity. Finally, it is important to model your overall tax position and understand how the contingencies might unwind, how attributes might be realised (or not) and how the former items mix with the resolution plans and maximise value (capital and liquidity).
Read the full article from Taxand US to understand more
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