United Services Organizations

“Schedule D, Part V, Line 4 THE BOARD DESIGNATED PORTION OF THE ENDOWMENT IS RESTRICTED TO ASSIST THE UNITED SERVICE ORGANIZATIONS, INC. ("USO, INC.") IN DELIVERING ITS PROGRAMS AND SERVICES FOR MANY YEARS INTO THE FUTURE. THESE BOARD DESIGNATED CONTRIBUTIONS AND INVESTMENT EARNINGS ARE AVAILABLE TO FUND OPERATIONS; HOWEVER, CONTRIBUTIONS/EARNINGS HAVE NOT BEEN SPENT TO DATE. THE RESTRICTED PORTION OF THE ENDOWMENT IS TO BE PUBLICLY HELD IN PERPETUITY, WITH EARNINGS AVAILABLE TO ASSIST THE USO,inc. IN DELIVERING PROGRAMS AND SERVICES FOR MANY YEARS INTO THE FUTURE.”

“Schedule D, Part X, Line 2 PURSUANT TO US GAAP, THE FOUNDATION IS AUDITED AND REPORTED IN THE CONSOLIDATED AUDITED FINANCIAL STATEMENTS OF THE USO, INC. THE FOLLOWING FOOTNOTE IS INCLUDED IN THE CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2016. The USO and Foundation are exempt from federal income tax under Section 501(a) of the Internal Revenue Code (IRC) of 1986, as amended, as organizations described in IRC Section 501(c)(3). However, income generated from activities unrelated to the exempt purposes of the organizations are subject to tax under IRC Section 511. USO and Foundation have processes presently in place to ensure the maintenance of tax-exempt status; to identify and report unrelated income; to determine filing and tax obligations in jurisdictions for which the organization has nexus; and to identify and evaluate other matters that may be considered income tax positions. Neither the USO nor Foundation had any material unrelated business income tax liability for the years ended December 31, 2016 and 2015. Therefore, no income tax liability has been provided in the accompanying consolidated financial statements. US GAAP requires that an income tax position be recognized or derecognized based on a 'more likely than not' threshold. USO and Foundation follow guidance that clarifies the accounting for uncertainty in tax positions taken or expected to be taken in a tax return, including issues relating to financial statement recognition and measurement. This guidance provides that the tax effects from an uncertain tax position can only be recognized in the financial statements if the position is 'more-likely-than-not' to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. The tax years ending December 31, 2016, 2015, 2014 and 2013 are still open to audit for both federal and state purposes. USO and Foundation have determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements.”