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Tax Clawback Agreement

What is 'Tax Clawback Agreement'

An arrangement whereby the tax benefits received from a given venture are reinvested in the venture to cover any cash shortages. A tax clawback is just one of many types of "clawback" arrangements, which cover various distributions such as profits, dividends or even stock distributions.

Explaining 'Tax Clawback Agreement'

Along with dividend clawbacks, tax clawbacks are among the most popular type of clawback arrangements, providing instant and easy access to additional financing. Clawbacks are also used to describe what, in effect, amounts to a return of previously distributed money. For example, when Troubled Asset Relief Program (TARP) funds were used (in certain cases) to finance executive bonuses in 2008, it prompted some in Congress to advocate a tax clawback, whereby the executives in question would be forced to pay back some of the bonus money in the form of higher taxes.


Further Reading


Taxation and the Worlds of Welfare
academic.oup.com [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

Adding a stick to the carrot: Location incentives with clawbacks, recisions, and recalibrationsAdding a stick to the carrot: Location incentives with clawbacks, recisions, and recalibrations
journals.sagepub.com [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

Fields of dreams: The expectation and common reality of tax increment financingFields of dreams: The expectation and common reality of tax increment financing
heinonline.org [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

The financialisation of urban development: Tax Increment Financing in Newcastle upon TyneThe financialisation of urban development: Tax Increment Financing in Newcastle upon Tyne
journals.sagepub.com [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

Claw-back Tax-a Fang of Romanian Health System, or a Moral Duty?Claw-back Tax-a Fang of Romanian Health System, or a Moral Duty?
www.proceedings.univ-danubius.ro [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

Lights, camera, but no action? Tax and economic development lessons from state motion picture incentive programsLights, camera, but no action? Tax and economic development lessons from state motion picture incentive programs
journals.sagepub.com [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

Tax increment financing in theory and practiceTax increment financing in theory and practice
books.google.com [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

The political economy of property tax reformThe political economy of property tax reform
www.oecd-ilibrary.org [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …

The economics of deferral and clawback requirements: An indirect tax approach to compensation regulationThe economics of deferral and clawback requirements: An indirect tax approach to compensation regulation
papers.ssrn.com [PDF]
… Cite Citation. Monica Prasad, Yingying Deng, Taxation and the worlds of welfare, Socio-Economic Review, Volume 7, Issue 3, July 2009, Pages 431–457, https://doi.org/10.1093/ser/mwp005. Download citation file …



Q&A About Tax Clawback Agreement


What is a tax clawback?

A tax clawback is an arrangement whereby the tax benefits received from a given venture are reinvested in the venture to cover any cash shortages.

What are some of the most popular types of clawbacks?

Some of the most popular types include dividend clawbacks and tax clawbacks.

When would you use a dividend or tax clawback?

Claw backs can be used when there is a shortage in capital for your business.

When was TARP funding used for executive bonuses in 28?

In 2008, Troubled Asset Relief Program (TARP) funds were used (in certain cases) to finance executive bonuses in 28, prompting some in Congress to advocate a tax claw back, whereby executives would be forced to pay back some bonus money in the form of higher taxes.

How do dividend clawbacks differ from other types of clawbacks?

Dividend claws back money that has already been distributed to shareholders, while other types of claw backs recover funds that have not yet been distributed.

Why did this prompt calls for a tax on TARP-financed bonuses?

This prompted calls for a tax on TARP-financed bonuses because it seemed like executives who had benefited from government assistance were now being rewarded with large bonuses by companies receiving such assistance .

Who advocated this type of action against these executives ?

Members of Congress advocated this type answer 9

What does it mean when something amounts to a return of previously distributed money?

It means that the company will pay back some or all of their profits as taxes if they were not able to use them before they expired.

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