Tax Clawback Agreement

AAA

DEFINITION of '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.

INVESTOPEDIA EXPLAINS'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.

RELATED TERMS
  1. Reinvestment Rate

    The amount of interest that can be earned when money is taken ...
  2. Reinvestment

    Using dividends, interest and capital gains earned in an investment ...
  3. Moore's Law

    An observation made by Intel co-founder Gordon Moore in 1965. ...
  4. Tax Refund Anticipation Loan - ...

    A loan provided by a third party against a taxpayer's expected ...
  5. Clawback

    1. Money or benefits that are distributed and then taken back ...
  6. Dividend Clawback

    An arrangement under which those financing a project agree to ...
Related Articles
  1. Insurance

    Liquidity And Toxicity: Will TARP Fix The Financial System?

    TARP is the government's attempt to forestall a deep, extended recession. Will it work?
  2. Taxes

    The History Of Taxes In The U.S.

    The number of taxes that we now consider a given did not always exist. Find out how they arose.
  3. Taxes

    "Temporary" Taxes That Stuck

    Taxpayers should be wary when a new "temporary tax" is introduced. Sometimes these temporary taxes are anything but.
  4. Bonds & Fixed Income

    Bailout Acronyms 101

    The subprime meltdown gave rise to a mouthful of financial acronyms. Learn how to sort through this alphabet soup.
  5. Stock Analysis

    What AIG Looks Like Now (and How it Got that Way)

    Despite some mammoth mistakes and a gargantuan government bailout, AIG remains a global insurance powerhouse. Here's how it maintains its position.
  6. Investing Basics

    Got Dividends? Here's How to Reinvest Them

    Reinvesting dividends is almost always a good idea if you intend to hold your shares for the long term, and there are several ways to do it.
  7. Taxes

    Are You Paying Too Much in Taxes?

    Overpaying taxes amounts to an interest-free loan to the government. Here are some ways to avoid that scenario.
  8. Taxes

    What's a Tax Shield?

    A tax shield is a deduction, credit or other means used to reduce the amount of taxes an individual or business owes to the government.
  9. Taxes

    What's an Indirect Tax?

    An indirect tax is levied on goods or services rather than on an individual or a company.
  10. Taxes

    Understanding Excise Taxes

    An excise tax is an indirect levy charged for the sale or use of a particular item.
RELATED FAQS
  1. What are the best free online calculators for calculating my taxable income?

    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
  2. In what instances does overhead qualify for certain tax allowances?

    Businesses are just as keen as anyone else to keep their tax burdens low by any means possible. Overhead expenses often qualify ... Read Full Answer >>
  3. How are write-offs recorded on my tax return?

    The way your write-offs are recorded on your tax return varies depending on whether you are filing a personal or business ... Read Full Answer >>
  4. What is the difference between comprehensive income and gross income?

    Comprehensive income and gross income are similar, but comprehensive income is a specific term used on a company's financial ... Read Full Answer >>
  5. What are some good free online calculators for AGI (adjusted gross income)?

    Both CNNMoney.com and Bankrate.com offer free online calculators for figuring adjusted gross income, or AGI. Calculations ... Read Full Answer >>
  6. What is the difference between AGI (adjusted gross income) and gross income?

    In the United States, individuals pay taxes based on their adjusted gross income, or AGI, rather than their gross income. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Nanny Tax

    A federal tax that must be paid by people who hire household help (a babysitter, maid, gardener, etc.) and pay them a total ...
  2. Dog And Pony Show

    A colloquial term that generally refers to a presentation or seminar to market new products or services to potential buyers.
  3. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  4. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  5. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  6. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!