SecProbe.io

CORRESP
1
filename1.htm

Letter of Correspondence

 August 5, 2005

 VIA EDGAR AND FEDERAL EXPRESS

 Securities and Exchange Commission

 Mail Stop 4561

 100 F Street, NE

 Washington, DC 20549

 Attn: John P. Nolan and Edwin Adames

RE:

Taylor Capital Group, Inc.

Form 10-K filed March 10, 2005

File No. 0-50034

 Dear Messrs. Nolan and Adames:

 Below is our response to your comment letter dated August 4, 2005:

 SEC Comment:

 Note 10. Income Taxes, page 80

 1. Please tell us, and provide us with the proposed disclosure in future filings regarding
the following:

•

State the dollar amount of the portion of the settlement charges that were deducted in the Company’s 2002 income tax return and discuss the basis for not recording a similar
tax deduction in the financial statements. Disclose, if true, that you are applying a more likely than not threshold for reporting the settlement charges on your tax return and are using a higher SFAS 5 probability threshold for recognizing the tax
benefits on your financial statements.

•

Disclose that you have recorded a liability for income taxes that included the reserves for the potential disallowance of the deduction relating to the litigation settlement charges
that you deducted in 2002.

 Response:

 We plan on providing the following disclosures in the MD&A -
“Income Taxes” section of our 3rd Quarter 2005 Form 10-Q and December 31, 2005 annual Form 10-K filings.

 In October 2002, the Company paid its
obligation to a settlement fund to satisfy the claims of various plaintiff groups under certain lawsuits. The Company has not recognized any income tax benefit for financial reporting purposes with respect to the litigation settlement payment of
$61.9 million. However, the Company did deduct a portion of the settlement ($28.7 million) on

its 2002 income tax return, because management believes that a portion of the settlement that relates to specific settled claims is more likely than not
deductible as ordinary and necessary business expense. This degree of certainty is not sufficient to recognize an income tax benefit for financial reporting purposes. The Company will recognize all or a portion of the income tax benefit for
financial reporting purposes if and when the Company determines that the position it took on its 2002 income tax return becomes probable of being sustained by the taxing authorities. Given the complexity of the litigation, the settlement and related
tax law, management continues to believe that only a specific resolution of the matter with the taxing authorities or the expiration of the statute of limitations would provide sufficient evidence for management to conclude that the deductibility
was probable. While the statute of limitations for the 2002 tax return expires in September 2006, the Internal Revenue Service can request an extension of the statute of limitations at any time prior to that date. Accrued interest, taxes and other
liabilities on our consolidated balance sheet at December 31, 200X include $12.X million representing the tax benefit of the deduction of $11.4 million and $XXX of related accrued interest through such date, if the deduction were disallowed by the
taxing authorities.

 We also plan to provide a portion of the
disclosure proposed above in the Income Taxes footnote to the financial statements.

 SEC Comment

•

Reconcile the $12 million possible tax benefit you deducted on your 2002 tax return with the settlement tax benefit of $10.045 million you state was recognized for the $28.7 million
portion of litigation settlement charges you determined in Exhibit A to your response letter dated July 7, 2005.

 Response

 The $12 million possible tax benefit was a product of the $28.7 million we deducted on our return multiplied by the state and federal tax rates in effect
in 2002. Exhibit A in our July 7, 2005 letter was supplemental information to clarify our accounting treatment in 2002. The table in Exhibit A was in accordance with the footnote disclosure that requires the reconciliation be performed by applying
the federal statutory rate. However, the tax benefit associated with the deduction would also include the impact of state income taxes.

 Below is a reconciliation of the $10.045 million in Exhibit A and the $12 million disclosed in our
MD&A. This information is provided supplementally to respond to your question. We do not plan to add this specific disclosure to our future filings.

 Federal tax benefit ($28.7 million deduction * 35% federal tax rate) =

$
10.045
MM

 State tax benefit ($28.7 million deduction * 7.18% state tax rate) =

2.061
MM

 Less: federal tax benefit for increased state taxes ($2.061 * 35%) =

(.721
)MM

 Total tax benefit

11.385

 Interest from 3/15/2003 to 12/31/2004

787

 Possible tax benefit disclosed in MD&A

$
12.172
MM

 SEC Comment

•

Disclose where in the notes to the financial statements you have disclosed the income tax liability for $10.045 million related to the potential disallowance of this tax deduction.

 Response

 The income tax liability of $11.4 million plus accrued interest of $787,000
at December 31, 2004 is included on the consolidated balance sheet in the $46.1 million liability captioned “Accrued interest, taxes and other liabilities”. The last sentence of our planned disclosure above identifies where the liability
is reported.

 SEC Comment

 2. Please consider disclosing in future filings the potential effects of the FASB Exposure
draft of proposed interpretation “Accounting for Uncertain Tax Positions” on your accounting for uncertain tax positions such as those regarding the deductibility of litigation settlement charges.

 Response

 We plan on providing the following disclosure in the MD&A – “New Accounting Pronouncements” section of
our 3rd Quarter 2005 Form 10-Q and December 31, 2005 annual Form 10-K filings.

 In July 2005, FASB released a proposed interpretation,
“Accounting for Uncertain Tax Positions, an interpretation of FASB Statement No. 109”. The interpretation clarifies that an enterprise should recognize the financial statement effects of a tax position when that position is probable of
being sustained on audit by the taxing authorities. The term probable in the interpretation is defined to mean “the future event is likely to occur”. If the probable recognition threshold is not initially met, recognition of the benefit
shall occur in the interim period that

the probable threshold is subsequently met, the tax matter is ultimately resolved or the statute of limitations has expired. The interpretation also requires
the recognition of a charge to income for interest accrued based on the difference between the tax position recognized in the financial statements and the amount claimed in the tax return. Finally, an enterprise should disclose loss or gain
contingencies that might result from uncertain tax positions. The Company believes its accounting for uncertain tax positions is consistent with the proposed guidance, therefore, the adoption of this interpretation is not expected to have a material
impact on our consolidated financial statements. This proposed interpretation could be revised prior to its final approval and issuance.

 We believe the responses above fully address the comments contained in your letter.

 Sincerely,

 /s/ DANIEL C. STEVENS

Daniel C. Stevens

Chief Financial Officer

Cc:

Frank O’Connor, partner, KPMG LLP

Don Coglianese, partner, KPMG LLP

Steven A. Shapiro, partner, Katten Muchin Rosenman LLP