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.