What changed in this filing

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Item 1A. Risk Factors

2023-02-10 compared with 2022-02-11 · 115 added, 110 removed, 262 unchanged (46% of the section changed)

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See also “Cautions Regarding Forward-Looking Statements” in Item 7 .

Business-related Risks, including risks relating to COVID-19

Business-related Risks

Our revenues and results of operations depend on the market value and composition of our AUM, which can fluctuate significantly based on various factors, including many factors outside of our control.

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For example, the dramatic securities market declines experienced during March 2020, which resulted from the global effects of COVID-19, caused a significant reduction in our AUM.

Markets and AUM levels have since recovered to new highs following unprecedented, coordinated monetary and fiscal policy support and the approval of vaccines to help remedy the global pandemic.

However, we recognize that, due to continued uncertainty associated with these circumstances, markets may remain volatile and, accordingly, there remains risk of a significant reduction in our revenues and net income in future periods, particularly if the negative effects on the global economy from COVID accelerate.

Markets and AUM levels recovered to new highs in 2021 following unprecedented, coordinated monetary and fiscal policy support and the approval of vaccines to help remedy the global pandemic.

However, significant supply chain challenges, energy shortages and labor shortages, brought about by COVID-19 and significantly exacerbated by the conflict in Ukraine, contributed to heightened global inflationary pressures, which resulted in sizable interest rate increases and associated market volatility in 2022.

We recognize that, due to continued uncertainty associated with these circumstances, markets may remain volatile and, accordingly, there remains risk of a significant reduction in our revenues and net income in future periods.

Global economies and financial markets are increasingly interconnected, which increases the probability that conditions in one country or region might adversely impact a different country or region.

Conditions affecting the general economy, including political, social or economic instability at the local, regional or global level, such as the U.S.

civil unrest centered around racial inequity experienced in 2020 or the riot experienced in Washington D.C.

in January 2021 surrounding the transition to a new Presidential administration, may also affect the market value of our AUM.

Health crises, such as the COVID-19 pandemic, as well as other incidents that interrupt the expected course of events, such as natural disasters, war or civil disturbance, acts of terrorism (whether foreign or domestic), power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have had and may in the future have a significant adverse effect on financial markets and our AUM, revenues and net income.

Conditions affecting the general economy, including political, social or economic instability at the local, regional or global level may also affect the market value of our AUM.

Health crises, such as the COVID-19 pandemic, as well as other incidents that interrupt the expected course of events, such as natural disasters, war (such as the ongoing conflict in Ukraine) or civil disturbance, acts of terrorism (whether foreign or domestic), power outages and other unforeseeable and external events, and the public response to or fear of such diseases or events, have had and may in the future have a significant adverse effect on financial markets and our AUM, revenues and net income.

Furthermore, the preventative and protective health-related actions, such as business activity suspensions and population lock-downs, that governments have taken, and may continue to take, in response to COVID-19 have resulted, and may continue to result, in periods of business interruption, inability to obtain raw materials, supplies and component parts, and reduced or disrupted operations.

These circumstances have caused, and may continue to cause, significant economic disruption and high levels of unemployment, as well as inflationary pressures, which could adversely affect the financial condition and results of operations of many of the companies in which we invest, and likely reduce the market value of their securities and thus our AUM and revenues.

Furthermore, significant market volatility and uncertainty, and reductions in the availability of margin financing, can significantly limit the liquidity of certain asset backed and other securities, making it at times impossible to sell these securities at prices reflecting their true economic value.

While liquidity conditions have improved considerably since the first quarter of 2020 following the stimulus programs announced by the U.S.

Federal Reserve and U.S.

Treasury, we recognize the possibility that conditions could deteriorate in the future.

Also, significant market volatility and uncertainty, and reductions in the availability of margin financing, can significantly limit the liquidity of certain asset backed and other securities, making it at times impossible to sell these securities at prices reflecting their true economic value.

While liquidity conditions were relatively stable in 2022 despite market volatility, we recognize the possibility that conditions could deteriorate in the future.

Lack of liquidity makes it more difficult for our funds to meet redemption requests.

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A reduction in fee levels would reduce our revenues.

• Interest Rate Changes .

Investor interest in and the valuation of our fixed income and multi-asset investment portfolios can be adversely affected by changes in interest rates, particularly if interest rates increase substantially and quickly.

A decrease in the value of our AUM, a decrease in the amount of AUM we manage, an adverse mix shift in our AUM and/or a reduction in the level of fees we charge would adversely affect our investment advisory fees and revenues.

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The industry-wide shift from actively managed investment services to passive services has adversely affected our investment advisory and services fees, revenues and results of operations, and this trend may continue.

Our competitive environment has become increasingly difficult over the past decade, as active managers, which invest based on individual security selection, have, on average, consistently underperformed passive services, which invest based on market indices.

Active performance relative to benchmarks as of mid-2021 remained mixed, with 47% of active managers outperforming their passive benchmarks for the 12 months ended June 30, 2021 (latest data available).

stock active funds fared better with 59% outperforming benchmarks, while 40% of U.S.

large-cap stock active funds outperformed.

Actively-managed bond funds generally performed well in 2021, with intermediate core, corporate and high yield funds each generally outperforming benchmarks.

Flows into actively-managed funds improved industry-wide in 2021, with U.S.

industry-wide active mutual fund flows rebounding to inflows of $217 billion in 2021, contrasted with $196 billion of outflows in 2020.

Our competitive environment has become increasingly difficult, as active managers, which invest based on individual security selection, have, on average, consistently underperformed passive services, which invest based on market indices.

Active performance relative to benchmarks as of mid-2022 deteriorated from prior-year levels, with 40% of active managers outperforming their passive benchmarks for the 12 months ended June 30, 2022 (latest data available), compared to 47% for the prior 12-month period.

stock active funds fared better than non-U.S.

with 45% of U.S.

active stock funds outperforming benchmarks, as compared with 23% for non-U.S.

Performance of actively managed bond funds decreased sharply in 2022, with just 29% outperforming benchmarks, representing a 44% decline compared to the prior-year period.

Flows into actively managed funds deteriorated industry-wide in 2022, with U.S.

industry-wide active mutual fund outflows of $974 billion in 2022, contrasted with inflows of $148 billion in 2021.

Active fixed income U.S.

mutual fund inflows accelerated to $366 billion in 2021, compared to $246 billion in 2020.

mutual funds experienced outflows of $482 billion in 2022, compared to inflows of $368 billion in 2021.

Furthermore, active equity U.S.

mutual fund outflows decelerated to $198 billion in 2021, compared to outflows of $338 billion in 2020.

However, the improvement in active fund flows was surpassed by increased demand for passive strategies in the U.S., as industry-wide total passive mutual net inflows increased to $918 billion in 2021 from $361 billion in 2020.

In this environment, organic growth through net inflows is difficult to achieve for active managers, such as AB, and requires taking market share from other active managers.

mutual fund outflows accelerated to $432 billion in 2022, compared to outflows of $191 billion in 2021.

By contrast, demand for passive strategies in the U.S.

continued to grow, though at a reduced rate from the prior year, as industry-wide total passive mutual fund net inflows of $518 billion in 2022 compared to $928 billion in 2021.

Organic growth through net inflows continues to be difficult to achieve for active managers, such as AB, and requires taking market share from other active managers.

The significant shift from active services to passive services adversely affects Bernstein Research Services revenues as well.

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EQH (our parent company) and its subsidiaries constitute our largest client.

Our EQH affiliates represented approximately 17% of our AUM as of December 31, 2021, and we earned approximately 3% of our net revenues from services we provided to them in 2021.

Our EQH affiliates represented approximately 16% of our AUM as of December 31, 2022, and we earned approximately 4% of our net revenues from services we provided to them.

Our related investment management agreements are terminable at any time or on short notice by either party, and EQH is not under any obligation to maintain any level of AUM with us.

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Our performance-based fees were $145.2 million, $245.1 million and $132.6 million in 2022, 2021 and 2020, respectively.

The revenues generated by Bernstein Research Services may be adversely affected by circumstances beyond our control, including declines in brokerage transaction rates, declines in global market volumes, failure to settle our trades by significant counterparties and the effects of MiFID II and Brexit.

Electronic, or “low-touch,” trading represents a significant percentage of buy-side trading activity and typically produces transaction fees that are significantly lower than the price of traditional full service fee rates.

As a result, blended pricing throughout our industry is lower now than it was historically, and price declines may continue.

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Also, our ability to access liquidity in such situations may be limited by what our funding relationships are able to offer us at such times.

We discuss the risks associated with the second installment of the Markets in Financial Instruments Directive II (“ MiFID II ”) and Brexit below in "Legal and Regulatory-related Risks" in this Item 1A.

Lastly, extensive changes proposed by the SEC to the equity market structure, including Regulation Best Execution, the proposed Order Competition Rule and proposed changes to Regulation NMA establishing, among other things, minimum pricing increments and required disclosures by larger broker-dealers and specified trading platforms, if adopted as proposed, could substantially increase the cost of conducting our buy-side and broker-dealer operations and, possibly, adversely impact trade execution quality.

We discuss the risks associated with Brexit below in "Legal and Regulatory-related Risks" in this Item 1A.

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We may be unable to develop new products and services, and the development of new products and services may expose us to reputational harm, additional costs or operational risk.

Our financial performance depends, in part, on our ability to react nimbly to changes in the asset management industry, respond to evolving client needs, and develop, market and manage new investment products and services.

Conversely, the development and introduction of new products and services, including the creation of products with concentrations in industries or sectors specific to individual client criteria, or with a focus on ESG, requires continuous innovative effort on our part and may require significant time and resources as well as ongoing support and investment.

Substantial risk and uncertainties are associated with the introduction of new products and services, including the implementation of new and appropriate operational controls and procedures, shifting client and market preferences, the introduction of competing products or services, and compliance with regulatory and disclosure requirements.

We can make no assurance that we will be able to develop new products and services that successfully address the needs of clients within needed timeframes.

Any failure to successfully develop new products and services, or effectively manage associated operational risks, could harm our reputation and expose us to additional costs, which could adversely affect our AUM, revenues and operating income.

Fluctuations in the exchange rates between the U.S.

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As a result, volatility in the capital markets may cause significant changes in our period-to-period financial and operating results.

We use various derivative instruments, including futures, forwards, swap and option contracts, in conjunction with our seed hedging program.

We use various derivative instruments, including futures, forwards, swaps and option contracts, in conjunction with our seed hedging program.

While in most cases broad market risks are hedged, our hedges are imperfect and some market risk remains.

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We may engage in strategic transactions that could pose risks.

As part of our business strategy, we consider potential strategic transactions, including acquisitions, dispositions, mergers, consolidations, joint venture partnerships and similar transactions, some of which may be material.

As part of our business strategy, we consider potential strategic transactions, including acquisitions (such as our purchase of CarVal Investors in 2022), dispositions, mergers, consolidations, joint venture partnerships (such as our planned joint venture partnership with SocGen) and similar transactions, some of which may be material.

These transactions, if undertaken, may involve various risks and present financial, managerial and operational challenges, including:.

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If market quotations for a security are not readily available, the Valuation Committee determines a fair value for the security.

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Extraordinary volatility in financial markets, significant liquidity constraints or our failure to adequately consider one or more factors when determining the fair value of a security based on information with limited market observability could result in our failing to properly value securities we hold for our clients or investments accounted for on our balance sheet.

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Although the overall percentage of our AUM that we fair value based on information with limited market observability is not significant, inaccurate fair value determinations can harm our clients, create regulatory issues and damage our reputation.

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We may not have sufficient information to confirm or review the accuracy of valuations provided to us by underlying external managers for the funds in which certain of our alternative investment products invest.

Certain of our alternative investment services invest in funds managed by external managers (“ External Managers ”) rather than investing directly in securities and other instruments.

As a result, our abilities will be limited with regard to (i) monitoring such investments, (ii) regularly obtaining complete, accurate and current information with respect to such investments and (iii) exercising control over such investments.

Accordingly, we may not have sufficient information to confirm or review the accuracy of valuations provided to us by External Managers.

In addition, we will be required to rely on External Managers’ compliance with any applicable investment guidelines and restrictions.

Any failure of an External Manager to operate within such guidelines or to provide accurate information with respect to the investment could subject our alternative investment products to losses and cause damage to our reputation.

The quantitative and systematic models we use in certain of our investment services may contain errors, resulting in imprecise risk assessments and unintended output.

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For additional information regarding competitive factors, see “Competition” in Item 1 .

Human Capital-related Risks

People-related Risks

We may be unable to continue to attract, motivate and retain key personnel, and the cost to retain key personnel could put pressure on our adjusted operating margin.

Our business depends on our ability to attract, motivate and retain highly skilled, and often highly specialized, technical, investment, managerial and executive personnel, and there is no assurance that we will be able to do so.

The market for these professionals is extremely competitive.

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Additionally, a decline in revenues may limit our ability to pay our employees at competitive levels, and maintaining (or increasing) compensation without a revenue increase, in order to retain key personnel, may adversely affect our operating margin.

As a result, we remain vigilant about aligning our cost structure (including headcount) with our revenue base.

For additional information regarding our compensation practices, see "Compensation Discussion and Analysis" in Item 11.

Our process of relocating our headquarters may not be executed as we envision.

We have established our corporate headquarters in and expect to relocate a total of approximately 1,250 jobs previously located in the New York metropolitan area to Nashville, Tennessee (for additional information, see “Relocation Strategy” in Item 7 ).

Although the eventual impact on AB from this process is not yet known, the uncertainty created by these circumstances could have a significant adverse effect on AB’s ability to motivate and retain current employees.

Further significant managerial and operational challenges could arise, such as ineffective transfer of institutional knowledge from current employees to newly-hired employees, if AB experiences significantly greater attrition among current employees than the firm anticipates in connection with the relocation and/or if the firm encounters more difficulty than expected in hiring qualified employees to help staff our Nashville headquarters.

Additionally, our estimates for both the transition costs and the corresponding expense savings relating to our headquarters relocation, which we discuss in more detail in “Relocation Strategy” in Item 7 , are based on our current assumptions of employee relocation costs, severance, and overlapping compensation and occupancy costs.

Our process of relocating our headquarters may not be executed as we have envisioned.

We have established our corporate headquarters in and have relocated a total of approximately 1,250 jobs previously located in the New York metropolitan area to Nashville, Tennessee (for additional information, see “Relocation Strategy” in Item 7 ).

Although the eventual impact on AB from this process is not yet known, the uncertainty created by these circumstances could adversely affect AB’s ability to motivate and retain current employees.

Further, significant managerial and operational challenges could arise if the firm encounters more difficulty than expected in hiring qualified employees to help staff our Nashville headquarters.

Additionally, our estimates for both the transition costs and the corresponding expense savings relating to our headquarters relocation are based on our current assumptions of employee relocation costs, severance, and overlapping compensation and occupancy costs.

If our assumptions turn out to be inaccurate, our expenses and operating income could be adversely affected.

Employee misconduct, which can be difficult to detect and deter, could harm us by impairing our ability to attract and retain clients and subjecting us to significant regulatory scrutiny, legal liability and reputational harm.

There have been several highly publicized cases involving fraud or other misconduct by employees in the financial services industry generally, and we are not immune.

Misconduct by employees could involve the improper use or disclosure of confidential information, which could result in legal action, regulatory sanctions, and reputational or financial harm.

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fraud, payment or solicitation of bribes and other deceptive practices or other misconduct by our employees could similarly subject us to regulatory scrutiny, legal liability and reputational damage.

Operational, Technology and Cyber-related Risks

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Additionally, while we take precautions to password protect and encrypt our laptops and sensitive information on our other mobile electronic devices, if such devices are stolen, misplaced or left unattended, they may become vulnerable to hacking or other unauthorized use, creating a possible security risk and resulting in potentially costly actions by us.

Furthermore, although we maintain a robust cyber security infrastructure and incident preparedness strategy, which we test periodically, we may be unable to respond, both internally and externally, to a cyber incident in a sufficiently expeditious manner.

Furthermore, although we maintain a robust cyber security infrastructure and incident preparedness strategy, which we test frequently, we may be unable to respond, both internally and externally, to a cyber incident in a sufficiently expeditious manner.

Any such failure could cause significant harm to our reputation and result in litigation, regulatory scrutiny and/or significant remediation costs.

Unpredictable events, including climate change, outbreak of infectious disease, natural disaster, dangerous weather conditions, technology failure, terrorist attack and political unrest, may adversely affect our ability to conduct business.

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Climate change and other unpredictable events, including outbreak of infectious disease, natural disaster, dangerous weather conditions, technology failure, terrorist attack and political unrest, may adversely affect our ability to conduct business.

War, terrorist attack, political unrest, power failure, climate change, natural disaster and rapid spread of infectious disease (such as the ongoing COVID-19 pandemic) could interrupt our operations by:

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• requiring substantial capital expenditures and operating expenses to remediate damage and restore operations.

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Despite the contingency plans and facilities we have in place, including system security measures, information back-up and disaster recovery processes, our ability to conduct business, including in key business centers where we have significant operations, such as New York City, London, England, and Nashville, Tennessee, may be adversely affected by a disruption in the infrastructure that supports our operations and the communities in which they are located.

Furthermore, climate change may increase the severity and frequency of catastrophes, or adversely affect our investment portfolio or investor sentiment.

Climate change may also increase the frequency and severity of weather-related disasters and pandemics.

And, climate change regulation may affect the prospects of companies and other entities whose securities in which we invest, or our willingness to continue to invest in such securities.

Despite the contingency plans and facilities we have in place, including system security measures, information back-up and disaster recovery processes, our ability to conduct business, including in key business centers where we have significant operations, such as Nashville, Tennessee, New York City, London, England, and Hong Kong, may be adversely affected by a disruption in the infrastructure that supports our operations and the communities in which they are located.

This may include a disruption involving electrical, communications, transportation or other services we may use or third parties with which we conduct business.

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The occurrence of mistakes, particularly significant ones, can have a material adverse effect on our reputation, results of operations and business prospects.

The individuals, third-party vendors or issuers on whom we rely to perform services for us or our clients may be unable or unwilling to honor their contractual obligations to us.

The individuals and third-party vendors on whom we rely to perform services for us or our clients may be unable or unwilling to honor their contractual obligations to us.

We rely on various counterparties and other third-party vendors to augment our existing investment, operational, financial and technological capabilities, but the use of a third-party vendor does not diminish AB's responsibility to ensure that client and regulatory obligations are met.

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If we are unable to effectively manage the risks associated with such third-party relationships, we may suffer fines, disciplinary action and reputational damage.

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We may not always successfully manage actual and potential conflicts of interest that arise in our business.

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Furthermore, our access to credit on reasonable terms is partially dependent on our firm’s credit ratings.

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Both Moody’s Investors Service, Inc.

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For additional information about our impairment testing, see Item 7 .

The insurance that we maintain may not fully cover all potential exposures.

We maintain professional liability, fidelity, cyber, property, casualty, business interruption and other types of insurance, but such insurance may not cover all risks associated with the operation of our business.

The insurance that we purchase may not fully cover all potential exposures.

We maintain professional liability, errors & omissions, fidelity, cyber, property, casualty, business interruption and other types of insurance, but such insurance may not cover all risks associated with the operation of our business.

Our coverage is subject to exclusions and limitations, including high self-insured retentions or deductibles and maximum limits and liabilities covered.

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A regulatory proceeding, even if it does not result in a finding of wrongdoing or sanction, could require substantial expenditures of time and money and could potentially damage our reputation.

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In recent years, global regulators have substantially increased their oversight of financial services.

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Moreover, the adoption of new laws, regulations or standards and changes in the interpretation or enforcement of existing laws, regulations or standards have directly affected, and will continue to affect, our business, including making our efforts to comply more expensive and time-consuming.

For example, in 2015 the Financial Supervisory Commission in Taiwan (the “ FSC ”) implemented new limits on the degree to which local investors can own an offshore investment product.

For example, there has been increasing regulatory focus on ESG-related practices by investment managers.

The SEC is poised in 2023 to issue a rule enhancing and standardizing climate disclosures by U.S.

public companies, including investment managers.

The SEC also has focused on the labeling by investment funds of their activities or investments as "sustainable" and has examined the methodology used by funds for determining ESG investments, with a keen focus on whether such labeling may be misleading.

Outside the U.S., the European Commission has adopted an action plan on financing sustainable growth, as well as initiatives at the European Union (the " EU ") level, such as the EU Sustainable Finance Disclosure Regulation (the " SFDR ").

Compliance with the SFDR and other ESG-related regulations may subject us to increased restrictions, disclosure obligations, and compliance and other associated costs, as well as potential reputational harm.

Also, in 2015 the Financial Supervisory Commission in Taiwan (the “ FSC ”) implemented new limits on the degree to which local investors can own an offshore investment product.

While certain exemptions have been available to us, should we not continue to qualify, the FSC’s rules could force some of our local resident investors to redeem their investments in our funds sold in Taiwan (and/or prevent further sales of those funds in Taiwan), some of which funds have local ownership levels substantially above the FSC limits.

This could lead to significant declines in our investment advisory and services fees and revenues earned from these funds.

In Europe, MiFID II, which became effective in January 2018, makes significant modifications to the manner in which European broker-dealers can be compensated for research.

These modifications have reduced, and are believed to have significantly reduced, the overall research spend by European buy-side firms, which has decreased the revenues we derive from our European clients.

Our European clients may continue to reduce their research budgets, which could result in a significant decline in our sell-side revenues.

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Also, while MiFID II is not applicable to firms operating outside of Europe, competitive and client pressures increasingly may force buy-side firms operating outside of Europe to pay for research from their own resources instead of through bundled trading commissions.

To the extent that occurs, we expect that research budgets from those clients will decrease further, which could result in an additional significant decline in our sell-side revenues.

Additionally, these competitive and client pressures may result in our buy-side operation paying for research out of our own resources instead of through bundled trading commissions, which could increase our firm's expenses and decrease our operating income.

Additionally, in July 2017 the Chief Executive of the U.K.

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Lastly, it also is uncertain how regulatory trends will further evolve, both in the U.S.

For example, following the Brexit referendum in June 2016, the U.K.'s departure from the European Union (the " EU ") resulted in the U.K.

For example, following the Brexit referendum in June 2016, the U.K.'s departure from the EU resulted in the U.K.

leaving the EU Single Market on December 31, 2020.

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AB Holding and AB Unitholders have more limited voting rights on matters affecting AB than do holders of common stock in a corporation.

Both Amended and Restated Agreements of Limited Partnership provide that Unitholders do not have any right to vote for directors of the General Partner and that Unitholders only can vote on certain extraordinary matters (including removal of the General Partner under certain extraordinary circumstances).

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extraordinary circumstances).

Additionally, the AB Partnership Agreement includes significant restrictions on the transfer of AB Units and provisions that have the practical effect of preventing the removal of the General Partner, which provisions are highly likely to prevent a change in control of AB’s management.

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Also, we have filed the transfer program as Exhibit 10.07 to this Form 10-K.

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Changes in the partnership structure of AB Holding and AB and/or changes in the tax law governing partnerships would have significant tax ramifications.

AB Holding, having elected under Section 7704(g) of the Code to be subject to a 3.5% federal tax on partnership gross income from the active conduct of a trade or business, is a PTP for federal income tax purposes.

AB Holding is also subject to the 4.0% New York City unincorporated business tax (“ UBT ”), net of credits for UBT paid by AB.

In order to preserve AB Holding’s status as a PTP for federal income tax purposes, management seeks to ensure that AB Holding does not directly or indirectly (through AB) enter into a substantial new line of business.

Changes in the treatment of AB Holding and AB as partnerships for tax purposes would have significant tax ramifications.

Having elected under Section 7704(g) of the Code to be subject to a 3.5% federal tax on partnership gross income from the active conduct of a trade or business, AB Holding is a PTP that is taxable as a partnership for federal income tax purposes.

To preserve AB Holding's status as a PTP that is taxed as a partnership for federal income tax purposes, AB Holding must not directly or indirectly (through AB) enter into a substantial new line of business.

A “new line of business” includes any business that is not closely related to AB’s historical business of providing research and diversified investment management and related services to its clients.

A new line of business is “substantial” when a partnership derives more than 15% of its gross income from, or uses more than 15% of its total assets in, the new line of business.

AB is a private partnership for federal income tax purposes and, accordingly, is not subject to federal and state corporate income taxes.

However, AB is subject to the 4.0% UBT.

Domestic corporate subsidiaries of AB, which are subject to federal, state and local income taxes, generally are included in the filing of a consolidated federal income tax return with separate state and local income tax returns being filed.

A new line of business is “substantial” when a partnership derives more than 15% of its gross income from, or uses more than 15% (by value) of its total assets in, the new line of business.

To preserve AB’s status as a private partnership for federal income tax purposes, AB Units must not be considered publicly traded.

If either or both AB Holding and AB were taxable as a corporation, the return on investment to Unitholders generally would be reduced because distributions to Unitholders generally would be subject to two layers of taxation:

first, amounts available for distribution would be subject to federal (and applicable state and local) taxes at the corporate entity level;

and second, Unitholders generally would be subject to federal (and applicable state and local) taxes upon receipt of dividends.

AB Holding and AB are subject to the 4.0% New York City unincorporated business tax (“UBT”).

AB Holding may net credits for UBT paid by AB.

Changes in tax law governing us or an increase in business activities outside the U.S.

could have a material impact on us.

Legislative proposals have been or may be introduced that, if enacted, could have a material adverse effect on us.

We cannot predict the outcome of such legislative proposals.

Each of AB's non-U.S.

corporate subsidiaries generally is subject to taxes in the foreign jurisdiction where it is located.

If our business increasingly operates in countries other than the U.S., AB’s effective tax rate will increase as our international subsidiaries are subject to corporate taxes in the jurisdictions where they are located.

In order to preserve AB’s status as a private partnership for federal income tax purposes, AB Units must not be considered publicly traded.

If such units were to be considered readily tradable, AB would be subject to federal and state corporate income tax on its net income.

Furthermore, as noted above , should AB enter into a substantial new line of business, AB Holding, by virtue of its ownership of AB, would lose its status as a PTP and would become subject to corporate income tax as set forth above .

If AB and AB Holding were to become subject to corporate income tax as set forth above , their net income and quarterly distributions to Unitholders would be materially reduced.

For information about the significant restrictions on transfer of AB Units, see the risk factor immediately above .

Additionally, past or future legislative proposals have been or may be introduced that, if enacted, could have a material adverse effect on us.

We cannot predict the outcome of such legislative proposals.

If, pursuant to the Bipartisan Budget Act of 2015 ("2015 Act"), any audit by the Internal Revenue Service ("IRS") of our income tax returns for any of our taxable years beginning after December 31, 2017 results in any adjustments, the IRS may collect any resulting taxes, including any applicable penalties and interest, directly from us, in which case our net income and the cash available for quarterly Unitholder distributions may be substantially reduced.

Although the IRS, under current law, generally determines tax adjustments at the partnership level when it audits the income tax return of a partnership, the IRS, with respect to taxable years beginning on or before December 31, 2017, is required to collect any additional taxes, interest and penalties from the partnership's individual partners.

The 2015 Act modifies this procedure for audits of a partnership’s taxable years beginning after December 31, 2017 and, if a partnership meets certain requirements and makes a proper election, for audits of a partnership’s taxable years beginning before January 1, 2018.

We may choose to make such an election if we receive a written notice of selection for examination for an eligible taxable year or if we file, on or after January 1, 2018, an administrative adjustment request for an eligible taxable year and otherwise qualify to make such an election.

Generally, we will have the ability to collect tax liability from our Unitholders in accordance with their percentage interests during the year under audit, but there can be no assurance that we will elect to do so or be able to do so under all circumstances.

If our business increasingly operates in countries other than the U.S., or if there are changes in tax law or rates of taxation in foreign jurisdictions where our corporate subsidiaries operate, AB's effective tax rate could increase.

If any audit by the Internal Revenue Service ("IRS") of our income tax returns for any of our taxable years beginning after December 31, 2017 results in any adjustments, the IRS may collect any resulting taxes, including any applicable penalties and interest, directly from us, in which case our net income and the cash available for quarterly Unitholder distributions may be substantially reduced.

For taxable years beginning after December 31, 2017, a "partnership representative" that we designate (a “ Partnership Representative ”) will have the sole authority to act on our behalf for purposes of, among other things, IRS audits and related proceedings (and any similar state or local audits and proceedings).

Any actions taken by us or by the Partnership Representative on our behalf in connection with such audits or proceedings will be binding on us and our Unitholders.

For an audit of a partnership's taxable years beginning after December 31, 2017, the IRS, absent an election by the partnership to the contrary ( see discussion below ), generally determines adjustments at the partnership level in the year in which the audit is resolved.

Generally, we will have the ability to collect any resulting tax liability (and any related interest and penalties) from our Unitholders in accordance with their percentage interests during the year under audit, but there can be no assurance that we will elect to do so or be able to do so under all circumstances.

If we do not collect such tax liability from our Unitholders in accordance with their percentage interests in the tax year under audit, our net income and the available cash for quarterly distributions to current Unitholders may be substantially reduced.

Accordingly, our current Unitholders may bear some or all of the tax liability resulting from such audit adjustment, even if such Unitholders did not own Units during the tax year under audit.

In particular, as a publicly traded partnership, our Partnership Representative (as defined below) may, in certain instances, request that any “imputed underpayment” resulting from an audit be adjusted by amounts of certain of our passive losses.

In particular, with respect to AB Holding, our Partnership Representative may, in certain instances, request that any “imputed under-payment” resulting from an audit be adjusted by amounts of certain of our passive losses.

If we successfully make such a request, we would have to reduce suspended passive loss carryovers in a manner which is binding on the partners.

federal income tax audits and judicial review of administrative adjustments by the IRS.

If we do not make such a designation, the IRS can select any person as the Partnership Representative.

Any actions taken by us or by the Partnership Representative on our behalf with respect to, among other things, U.S.

federal income tax audits and judicial review of administrative adjustments by the IRS, will be binding on us and our Unitholders.

2022 Annual Report 27

In addition, for taxable years beginning after December 31, 2017, we may, but are not required to, make an election to require our Unitholders to take into account on their income tax returns an audit adjustment made to our income tax items, also known as a “push-out” election.

Also, a partnership that is a partner of another partnership may elect to have its unitholders take an audit adjustment of the lower-tier partnership into account (i.e., the upper-tier partnership may push adjustments received from the lower-tier partnership through to the partners of the upper-tier partnership).

The upper-tier partnership must timely complete the “push-out” of the adjustment in order for it to be effective.

Such election must be made by the extended due date for the return for the adjustment year of the audited partnership, regardless of whether the audited partnership is required to file a return for the adjustment year or timely files a request for an extension for its return.

There are a number of requirements to make a “push-out” election and we may be unable or unwilling to comply with such requirements.

This may also require Unitholders to provide certain information to us (possibly including information about the beneficial owners of our Unitholders).

Also, a partnership that is a partner of another partnership (such as AB Holding with respect to AB) may elect to have its unitholders take an audit adjustment of the lower-tier partnership into account (i.e., the upper-tier partnership may push adjustments received from the lower-tier partnership through to the partners of the upper-tier partnership).

There are several requirements to make a “push-out” election and we may be unable or unwilling to comply with such requirements.

If we do not make a “push-out” election, we would be required to pay any tax resulting from the adjustments to our income tax items, and the cash available for distribution to unitholders would be substantially reduced.

unitholders may be subject to a 10% withholding tax on the sale of their AB Units or AB Holding Units, which could reduce the value of such Units.

Gain or loss from the sale or exchange of partnership units after November 27, 2017 by a non-U.S.

unitholder are treated as effectively connected with a U.S.

trade or business to the extent that the non-U.S.

unitholders may be subject to withholding tax on the sale of their AB Units or AB Holding Units, as well as on distributions, and we may be liable for any under-withholding.

Gain or loss from the sale or exchange of a partnership unit by a non-U.S.

unitholder is treated as effectively connected with a U.S.

trade or business and is subject to U.S.

federal income tax to the extent that the non-U.S.

unitholder would have had effectively connected gain or loss on a hypothetical sale by the partnership of all of its assets at fair market value as of the date of the sale or exchange of the partnership units.

The Tax Cuts and Jobs Act also imposed certain withholding requirements for the sale of partnership units by a non-U.S.

unitholder and authorized the IRS to issue regulations to carry out the withholding rules in the case of publicly traded partnerships.

On November 30, 2020, the IRS published final regulations (the " 1446 Final Regulations ") that address withholding tax and information reporting with respect to interests in publicly traded partnerships engaged in a U.S.

trade or business.

The 1446 Final Regulations end the suspension of withholding on the sale, exchange or disposition of certain interests in a publicly traded partnership, effective January 1, 2022, but place the primary responsibility for such withholding obligations for transfers effected through brokers on the broker, and not the publicly traded partnership.

However, the requirement to withhold on amounts realized in connection with the sale, exchange or disposition of certain interests in a publicly traded partnership (including by brokers) is suspended under Notice 2021-51 for transfers that occur before January 1, 2023, and no withholding will apply until that date.

Under the 1446 Final Regulations, a publicly traded partnership may be liable for any under-withholding by a broker that relies on a qualified notice for which the publicly traded partnership failed to make a reasonable estimate of the amounts required for determining the applicability of the "ten percent exception." The "ten percent exception" applies if, either (1) the publicly traded partnership was not engaged in a U.S.

trade or business during a specified period of time, or (2) upon a hypothetical sale of the publicly traded partnership's assets at fair market value, (i) the amount of net gain that would have been effectively connected with the conduct of a trade or business within the United States would be less than 10 percent of the total net gain, or (ii) no gain would have been effectively connected with the conduct of a trade or business in the United States.

We may be liable for any under-withholding by nominees on our Unitholder distributions after January 1, 2023.

Under the 1446 Final Regulations, for distributions made after January 1, 2022, a publicly traded partnership must post on its primary public website (and keep accessible for 10 years), and deliver to any registered holder that is a nominee, a qualified notice that states the amount of a distribution that is attributable to each type of income group specified in the 1446 Final Regulations.

If the qualified notice is incorrect such that it causes a broker to under-withhold with respect to an amount in excess of cumulative net income, the publicly traded partnership is liable for any under-withholding on such amount.

Notice 2021-51 suspends these requirements for distributions made before January 1, 2023.

In furtherance of the foregoing, a transferee of a partnership unit is required to withhold a tax equal to 10% of the amount realized on any transfer of such a partnership unit unless an exception applies.

Distributions by a PTP to a non-U.S.

unitholder also are subject to U.S.

withholding tax if the PTP has effectively connected gross income, gain or loss.

A transferee is not required to withhold tax if it relies on a certification issued by the transferor or the underlying partnership establishing that an exception to withholding applies.

If a transferee of AB Units is required to withhold and failed to properly do so, AB would be required to withhold on distributions to the transferee to satisfy that liability.

A broker is not required to withhold on the transfer of an interest in a PTP or on a distribution by a PTP if the PTP certifies that the "10% exception" applies.

This exception applies if, either (1) the PTP was not engaged in a U.S.

trade or business during a specified time period, or (2) upon a hypothetical sale of the PTP's assets at fair market value, (i) the amount of net gain that would have been effectively connected with the conduct of a trade or business within the U.S.

would be less than 10% of the total net gain, or (ii) no gain would have been effectively connected with the conduct of a trade or business in the U.S.

To make this certification, the PTP must issue a "qualified notice" indicating that it qualifies for this exception, which we have done and intend to continue to do.

The qualified notice must state the amount of a distribution that is attributable to each type of income group specified in the Treasury Regulations.

The PTP must post each qualified notice on its primary public website (and keep it accessible for 10 years) and deliver it to any registered holder that is a nominee.

A broker may not rely on such a certification if it has actual knowledge that the certification is incorrect or unreliable.

As a PTP, beginning on January 1, 2023, AB Holding may be liable for any under-withholding by a broker that relies on a qualified notice for which we failed to make a reasonable estimate of the amounts required for determining the applicability of the 10% exception.

AllianceBernstein

2 unchanged sentences

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What changed 10-K

Item 1A. Risk Factors