Local 817 I B T Scholarship Training Fund

PART X, LINE 2:

“The trust established under the plan to hold the plan's net assets is qualified pursuant to section 501(c) 9 of the internal revenue code ("irc") and, accordingly, the trust's net investment income is exempt from income taxes. The plan has obtained a favorable tax determination letter from the internal revenue service and the plan's management believes that the trust, as amended, continues to operate as designed. Accounting principles generally accepted in the united states of america requires the plan to evaluate tax positions taken by the plan and recognize a tax liability (or asset) if it has taken an uncertain position that more likely than not would not be sustained upon examination by the irs. The plan has analyzed the tax positions taken by the plan and has concluded that as of december 31, 2015, the following situation has occurred. On the basis of its tax exemption under section 501(c)(9) of the internal revenue code of 1986 (the "code"), the plan operated with the understanding that benefits provided to members and their dependents were exempt from taxation, including employment taxes and income tax withholdings. The plan engaged outside counsel to provide advice as to whether scholarship benefits qualify for exemption under code section 501(c)(3) or whether the benefits should be considered as employment based and subject to income tax, unless otherwise excluded under irs code sections 117 and 127. The plan has researched the matter and determined that it was appropriate to approach the internal revenue service to make a voluntary disclosure of the issue with a negotiated settlement to close out any potential tax liability. In 2015, the plan reached a settlement with the irs for the federal withholding taxes, which resulted in a reversal of the estimated payroll tax liability of $780,000. In 2016, after further negotiations the plan's settlement payment was approximately $468,000, which resulted in a second adjustment of the estimated payroll tax liability of $251,758. The plan settlement payment was made in 2017. As of december 31, 2021, the remaining payroll tax liability of $140,000 which represented the estimated new york state and new york city tax liabilities as of december 31, 2020 were written-off during the year ended december 31, 2021. The plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.”