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These excerpts taken from the C 8-K filed Jun 10, 2009. Tax Benefits”), to offset
future income. Citigroup’s use of the Tax Benefits in the future
could be significantly limited if it experiences an “ownership change” for U.S.
federal income tax purposes. In general, an “ownership change” will
occur if there is a cumulative change in Citigroup’s ownership by “5-percent
shareholders” (as defined under U.S. income tax laws) that exceeds 50 percentage points over
a rolling three-year period.
The Plan
is designed to reduce the likelihood that Citigroup will experience an ownership
change by (i) discouraging any person or group from becoming a “5-percent
shareholder” and (ii) discouraging any existing “5-percent shareholder” from
acquiring more than a specified number of additional shares of Citigroup
stock. There is no guarantee, however, that the Plan will prevent
Citigroup from experiencing an ownership change.
A corporation that experiences an
ownership change will generally be subject to an annual limitation on certain of
its pre-ownership change tax assets equal to the value of the corporation
immediately before the ownership change, multiplied by the long-term tax-exempt
rate (subject to certain adjustments), provided that the annual limitation would
be increased each year to the extent that there is an unused limitation in a
prior year. The limitation arising from an ownership change on
Citigroup’s ability to utilize the Tax Benefits depends on the value of
Citigroup’s stock at the time of the ownership change. If Citigroup’s Tax Benefits are subject
to limitation because it experiences an ownership change, depending on the value
of Citigroup’s stock at the time of the ownership change, Citigroup’s tangible
common equity might be reduced.
After
giving careful consideration to this issue, in light of the previously announced
exchange offers, Citigroup’s board of directors has concluded that the Plan is
in the best interests of Citigroup and its stockholders.
In
connection with the adoption of the Plan, on June 9, 2009, Citigroup’s board of
directors declared a dividend of one preferred stock purchase right (a “ Tax Benefits” means the net
operating loss carryovers, capital loss carryovers, general business credit
carryovers, alternative minimum tax credit carryovers and foreign tax credit
carryovers, as well as any loss or deduction attributable to a “net unrealized
built-in loss” within the meaning of Section 382, of the Company or any of its
Subsidiaries.
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