HomeTrust Bancshares in Asheville, N.C., has adopted a plan to protect itself from running afoul of the tax code.
The plan, often referred to as a "tax preservation plan," is designed to protect a company's deferred tax assets during a lengthy period of operating losses. The board of HomeTrust (HTBI) declared a dividend of one preferred stock purchase right for each outstanding share of the company's common stock. The rights will be distributed to shareholders, but would only be triggered when a shareholder approaches 5% ownership in the company.
The rights will remain active for three years, unless the board terminates the plan earlier.
The move is designed to address a certain rule from the Internal Revenue Service that limits the deferred tax benefit when shareholders owning 5% of a company increase their stake by more than 50 percentage points over a rolling three-year period. Such a "change in control" can accidently trip up banks that have sought tax benefits during a period of financial loss during throughout the recession. It can also deter potential investors who don't want to trip the code.
"We believe that the plan is a critical component of our efforts to enhance shareholder value," Dana Stonestreet, HomeTrust's president and chief operating officer, said in a press release.
HomeTrust said while the plan helps discourage shareholders form triggering the ownership change, there "is no guarantee" the plan can prevent an ownership change. The company has already implement the plan, though it said that it will still seek shareholder approval.