Tuesday, January 7, 2020

Section 337 of the Tax Code Applies to CUs Buying Banks

An article in Business Observer regarding the acquisition of Apollo Bank (Miami, FL) by Suncoast Credit Union (Tampa, FL) noted that the credit union will pay a 24.5 percent tax on the transaction.

According a Michael Bell, who is a lawyer with the law firm of Howard & Howard and has done a majority of bank mergers into credit unions, this tax deals with Section 337 of the Internal Revenue Code.

Michael Bell stated that Section 337 is a tax that "gets paid when when a for profit merges with a non profit." However, he notes this tax does not receive a lot of attention.

Bell pointed out these deals are heavily taxed and have resulted in hundreds of million dollars in taxes being paid.

The tax is on the difference between the fair market value and the tax basis of the bank.

The CEO of Suncoast CU said that the tax is worth gaining access to a new market.



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