Exhibit 10
INCOME TAX ALLOCATION AGREEMENT
This Income Tax Allocation Agreement ( Agreement ) dated January 1, 1996 is
made between Great Western Financial Corporation ( GWFC ) and Aristar, Inc.
( Aristar ).
WHEREAS, GWFC has established an Income Tax Allocation Policy dated December
15, 1995, set forth in Exhibit A for the purpose of prescribing procedures to
be followed for allocating income taxes and tax benefits among the corporate
affiliates of GWFC, including Aristar and for the payment of the allocated tax
and tax benefits by and to the affiliates;
WHEREAS, GWFC and Aristar desire to abide by the procedures prescribed in the
Income Tax Allocation Policy;
NOW, THEREFORE, GWFC and Aristar agree as follows:
Beginning with the taxable year ending December 31, 0000, XXXX and Aristar
will allocate income taxes and benefits in accordance with the terms of the
Income Tax Allocation Policy and any amendments thereto.
IN WITNESS WHEREOF, the parties have duly executed this Agreement by
authorized officers as of the date first written above.
GREAT WESTERN FINANCIAL CORPORATION
BY: /s/ Xxxx X. Xxxxxxx
Xxxx X. Xxxxxxx,
Executive Vice President and
Chief Financial Officer
ARISTAR, INC.
BY: /s/ Xxxxx X. Xxxx
Xxxxx X. Xxxx
Director, Senior Vice
President and Chief
Financial Officer
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Exhibit A
GREAT WESTERN FINANCIAL CORPORATION ( GWFC )
INCOME TAX ALLOCATION POLICY
This Income Tax Allocation Policy is for the purpose of establishing
procedures to be followedfor allocating taxes based on income and related tax
benefits among the corporate affiliates ( Members ) of GWFC (the Group ) and
for the payment of the allocated tax and tax benefits by and to the Members.
I. Federal Income Taxes
A. Regular Tax
The consolidated Federal income tax liability of the Group will be allocated
to Members included in consolidated Federal income tax returns as follows:
(1) Each Member that would pay tax on a separate return basis (the Income
Members ) will be allocated the amount of tax it would have paid for the
taxable year if its tax were computed on a separate return basis,
adjusted upward or downward, as appropriate, for limitations on items of
income, deductions, and credits that are modified in consolidation.
Revised December 15, 1995
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(2) The excess of the amount of tax allocation to the Income Members in (1)
above over the consolidated regular tax liability of the Group (the
Excess Tax Payments Pool ) shall be allocated as a tax benefit to each
of the other Members of the Group (the Loss Members ) in a consistent
manner that fairly reflects the losses and credits provided by the Loss
Members and any applicable consolidated return limitations.
(3) If the Group has a consolidated net operating loss or excess tax credits
for a year, the amounts determinable in (1) above will be based on the
current year tax rate and the amount determinable in (2) above shall
include the taxes recoverable from prior years resulting from the
carryback of the consolidated net operating loss and excess tax credits,
to consolidated return years and, where applicable, to the separate
return years (as defined in the consolidated tax return regulations) of
the Loss Members.
(4) A Loss Member will be allocated tax benefits for its net operating loss
and excess tax credits determined only as they cause a reduction in the
Group s consolidated tax liability for the current, past, or future
year(s) in which they are utilized or they recover taxes from a separate
return year of the Loss Member.
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(5) A Loss Member will not be allocated a tax benefit for a tax loss in an
amount that exceeds the amount determined by reference to its separate
return loss reflecting consolidated limitations and applicable statutory
tax rate for the year in which the loss is utilized. A balance
remaining in the Excess Tax Payments pool after full benefits have been
allocated to all Loss Members on the basis of this rule will be
allocated back to Income Members in proportion to, and in reduction of,
the amounts of tax allocated in (1) above.
B. Alternative Minimum Tax ( AMT )
The difference between the AMT and the regular tax ( AMT allocation )
will be allocated as follows: each Member will be allocated the lesser
of 1) its separate company AMT,1 or 2) its portion of AMT Allocation
based on the ratio of its separate company AMT to total AMT due if each
Member of the Group were to file a separate Federal return. Any excess
of consolidated AMT over the total separate company AMT will be
allocated to Loss Members based on the ratio of its separate company
loss to the total loss of all Loss Members.
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1 Separate company AMT is defined as the AMT that would be due if the
Member were to file a separate Federal income tax return.
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When a credit for a prior year minimum tax liability reduces the consolidated
regular tax for a year, such benefit will be allocated to the Members that
were allocated AMT in the prior year in accordance with the preceding
paragraph in a fair and equitable manner.
II. State Income Taxes
Except as provided below, each Member will be allocated a share of the state
taxes on income as follows:
(1) The Great Western Corporate Tax Department ( Tax Department ) will
calculate a consolidated blended state effective tax rate ( Blended
Rate ) by dividing the projected state income tax on state adjusted book
income2 by book taxable income.
(2) Each Member s state tax provision or benefit will be calculated by:
a) adjusting its beginning of the year deferred tax liability or asset
account to reflect the most current Blended Rate, and
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2 State adjusted book income takes into consideration adjustments for
prior years and for California and Florida permanent differences,
apportionment factors and taxation rules. Consideration will be given
to other state adjustments when, in the opinion of the Tax Department,
they become significant.
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b) multiplying its pre-tax book income (loss) by the final Blended Rate for
the year.
c) For the Consumer Finance Group ( CFG ), it is intended that the amount
of state income tax or tax benefit charged or credited to CFG will
approximate the amount that would have been payable or recoverable by
CFG if it s Members had filed their state income tax returns on a
separate entity basis (or separate subgroup basis for combined state
returns). Any deficit or benefit arising therefrom will be allocated to
GWFC.
The Tax Department will utilize a reasonable method to estimate the
amount that would have been payable or recoverable by CFG on a separate
entity basis (or separate subgroup basis for combined state returns).
The Tax Department will review, on an annual basis, the state income
taxes allocated to CFG under the above to ascertain that the methodology
used by the Tax Department is consistent with the intent of this
subparagraph and is reasonable in relationship to the taxes paid or owed
by CFG to taxing authorities.
(3) After the tax returns for the year are filed and the provision-to-return
reconciliation is completed, the Tax Department will calculate each
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Member's total California cumulative temporary differences as of December
31 of the prior year.3 This total will be multiplied by the most current
Blended Rate to derive the correct balance in each Member s deferred tax
account.
(4) The balances in the current and deferred tax liability accounts less the
current year provision will be adjusted to the deferred tax balance
computed in (3) above, and the difference will be settled through the
intercompany accounts.
(5) The amount of tax benefit allocated to a Loss Member by GWFC will not
exceed the actual tax reduction or refund allowed to be recognized under
Generally Accepted Accounting Principles by the Group due to the Member's
loss.
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3 Current year deferred tax items are excluded from this analysis due to their
tentative nature.
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(6) If a Member s operations are conducted wholly within a state that does not
impose a tax based on corporate income, no consolidated state income tax or
tax benefit will be allocated to it. Any deficit or benefit arising
therefrom will be allocated to GWFC.
(7) The amount of tax or tax benefit charged or credited to a regulated
corporation by GWFC will not exceed the amount that would have been payable
or recoverable by the regulated corporation if it had filed its tax returns
on a separate entity basis. Any deficit or benefit arising therefrom will
be allocated to GWFC. In addition, the regulated corporation will not pay
deferred tax liabilities to the holding company. This paragraph takes
precedent over all other provisions of the agreement.
(8) An insurance company Member will not be allocated income tax or tax benefit
related to a state that imposes a gross receipts tax in lieu of a tax on
income. Any deficit or benefit arising therefrom will be allocated to
GWFC.
(9) The Tax Department will review, on an annual basis, the state income taxes
allocated and the state tax liabilities determined under this policy to
assure that the results are consistent with Generally Accepted Accounting
Principles and reasonable in relationship to the taxes paid.
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III. Amended Returns and Audit Adjustments
Any change in the tax liability due to the filing of an amended return or an
audit by a taxing authority will be allocated among the Members in accordance
with the above rules.
IV. Tax Payments
A Member may be required to make a payment under this policy at such time as
GWFC is required to make related payments to the government or to other
Members.
If a payment is to be made to a Member under this policy, such payment shall
be made as soon as possible after the filing of the related return, receipt of
refund, or calculation of correction of prior payment.
