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Noel M. Gruber Senior Counsel 1250 24th Street NW, Suite 700 Washington, DC 20037 T (202) 349-8043 ngruber@buckleysandler.com |
September 29, 2017
VIA EDGAR
Mr. Michael Clampitt
Securities and Exchange Commission
Division of Corporation Finance
100 F Street, NE
Washington DC 20549-4561
Re: Luther Burbank Corporation (CIK 0001475348)
Amendment No. 1 to Draft Registration Statement on Form S-1
Submitted September 8, 2017
File No.: 377-01642
Dear Mr. Clampitt:
On behalf of Luther Burbank Corporation (the “Company”), we hereby provide the Company’s response to the comments contained in your letter dated, September 20, 2017 relating to the above referenced registration statement on Form S-1 (the “Registration Statement”).
For convenience we have preceded each of the Company’s responses with the Commission staff’s comment. All capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Registration Statement.
Prospectus Summary
Agreements with Our Existing Shareholders, page 11
1. Please revise to disclose more information regarding this agreement. Please disclose:
· The balance in the Accumulated Adjustments Account at 6/30/17;
The filing has been revised to disclose the amount of the accumulated adjustment account.
· If this is the amount to be distributed to existing holders;
The filing has been revised to disclose that the amount of the proposed distributions is less than the amount of the accumulated adjustment account.
· The maximum liability if the S Corp election is disallowed by the IRS;
As discussed with members of Staff, the Company does not believe that disclosure of an aggregate figure for the potential maximum liability if the Company’s S Corporation election is denied is an appropriate or meaningful disclosure.
The Company believes that the denial of the S corporation election is highly improbable, in light of the procedures the Company and its few shareholders historically utilized in connection with its consideration and implementation of the S Corporation election and in connection with transfers of shares to trusts for the benefit of the shareholders and members of their families. The Company’s shares have been transferred only a handful of times since the organization of the Company, for gifts and estate planning purposes. The Company and shareholders were cognizant of the importance of maintaining the qualification of the Company as an S Corporation, and carefully evaluated proposed transfers.
The Selected Historical and Pro Forma Financial Information reflects the pro forma tax liability of the Company for the periods indicated as if the Company were a C Corporation, using an assumed 42% combined tax rate. The Registration Statement already contains, at page 55, risk factors addressing the tax agreement with the existing shareholders and the adverse effect of the invalidity of the S election, including a statement that “[t]he amount we would be obligated to pay include taxes on all of our taxable income while we were an S Corporation.” We have added at page 11 a cross reference to the risk factor at page 55, and added a cross reference at page 55 to the Selected Historical and Pro Forma Financial Information in order to facilitate investor understanding of the issue without inclusion of a speculative liability amount relating to an event which the Company believes to be improbable, accompanied by extensive qualifications and caveats.
Calculation of a maximum liability would be an uncertain process in any event, given the many variables within the discretion of taxing authorities (period to be challenged, discretion in assessment of penalties and interest, negotiations, etc.). Inclusion of a maximum potential liability amount would reflect a figure that could mislead investors. It would be a “headline” number, which if taken out of context would distort the Company’s true liability position, as it would not be accompanied by the extensive caveats and qualifications that would be included with any disclosure of a theoretical maximum amount. We believe that such a disclosure would be highly unusual, and are not aware of any circumstance in which another financial institution terminating its S Corporation status has provided such a disclosure.
We respectfully request that Staff withdraw the comment requiring this disclosure.
