The Centennial Bank merger deal, as described, shouldn't fall under Carter's tax cut | Arkansas Blog

Wednesday, June 26, 2013

The Centennial Bank merger deal, as described, shouldn't fall under Carter's tax cut

Posted By on Wed, Jun 26, 2013 at 1:42 PM

DAVY CARTER: His new tax cut shouldnt play a factor in deal struck by his new employer.
  • DAVY CARTER: His new tax cut shouldn't play a factor in deal struck by his new employer.
Noted, because someone asked:

HomeBancshares, the parent for Centennial Bank, announced yesterday that it was acquiring Liberty Bancshares for $250 million in Home stock and $30 million in cash.

In the 2013 legislative session, House Speaker Davy Carter passed a capital gains tax cut that said, among others:

The amount of net capital gain in excess of $10 million from a gain realized on or after January 1, 2014, is exempt from the state income tax.

Carter left Centennial Bank as a division leader before the session. After the session, Carter was hired as executive vice president of Home Bancshares.

The news release on the bank acquisition said:

The acquisition is expected to close late in the third quarter or early in the fourth quarter of 2013.

Thus, if the deal closes as anticipated in tax year 2013, the lower capital gains tax rate passed by Carter won't apply to this deal. The portion of the sale paid in stock wouldn't bring a capital gains tax in any case unless the shares received were sold. The cash portion of such a sale could be taxed, depending on how much of the cash constituted a gain in the value of the original investment. Then, for purposes of the new exemption, you'd have to know how much of the gain was in excess of $10 million and qualifying for total exemption. Wallace Fowler is the major stock holder in Liberty.

As it stands, the capital gains tax under state income tax law is roughly 4.9 percent of the gain. Carter's bill lowers that rate for all gains to 3.5 percent in 2015.

I'll count on the bean counters to let me know what I've missed here.

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