Harvard Community Credit Union

Schedule D, Page 3, Part X

“The credit union is a tax-exempt entity under internal revenue code 501(c) (14), but may be subject to taxation on income unrelated to the credit union's exempt function. In 2007, the internal revenue service (irs) issued 25 technical advice memorandums (tams) related to audits of credit unions in alabama and connecticut. The tams identified various revenue sources the irs considered unrelated business income (ubi). Since the tams have been published, they could be considered authority by the irs for purposes of reporting ubi. The tams will be relied upon by irs agents as guidance in determining what items of income may be subject to unrelated business income tax (ubit). As a result, at this time there is uncertainty regarding whether state chartered credit unions should pay income tax on certain types of net taxable income from activities that taxing authorities consider unrelated to the purpose from which the credit union was granted non-taxable status. The credit union has not filed any unrelated business income tax returns in the past for potential taxable activities. The taxing authorities have the ability to assess taxes, penalties and interest for any years for which no tax return was filed. In the opinion of management, any liability resulting from taxing authorities imposing income taxes on the net unrelated business taxable income from activities considered to be unrelated to the credit union's non-taxable status is not expected to have a material effect on the credit union's financial position or results of operations.”