Brown & Williamson Tobacco Welfare Benefit Trust

Form 990, Schedule D, Part X, Ln 2

“ASC 740 DISCLOSURE The VEBA trust agreements as established under the Plan to hold a portion of the Plan's net assets, are qualified pursuant to Section 501(c)(9) of the Internal Revenue Code. Accordingly, the net investment income of the VEBA trusts is generally exempt from income taxes. To the extent the VEBA trusts recognize any unrelated business taxable income as defined in Section 512 of the Internal Revenue Code, the VEBA trusts are required to pay taxes on such income. The provisions for such taxes are recorded in accrued administrative expenses and charged to administrative expense. The Plan has obtained favorable tax determination letters from the Internal Revenue Service for the Non-Collectively Bargained Trust and the Collectively Bargained Trust dated January 9, 1979, and January 18, 1994, respectively. The Plan has been amended since receiving the determination letters. However, the plan administrator believes the trusts are currently designed and are being operated in compliance with the applicable requirements of the Internal Revenue Code. Accounting principles generally accepted in the United States of America require plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. The plan administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2016, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The plan administrator believes it is no longer subject to income tax examinations for years prior to 2013.”