Northwest Center Services

Schedule D, Part X, Line 2

“Income taxes - The Internal Revenue Service has determined that Northwest Center is exempt from federal income taxes under the provisions of Section 501(a) of the Internal Revenue Code because NWC qualifies as an organization included within Section 501(c)(3) of the Internal Revenue Code. In 2018, NWCS requested the IRS provide confirmation that the structure of the Organization sufficiently complies with all IRS guidelines for 501(c)(3) status. Management believes, on advice of counsel, that it will receive a positive confirmation from the IRS. NWC did incur net unrelated business income tax for the year ended December 31, 2019 and 2018, but it is not material to the financial statements. NWC has net operating losses of approximately $3,000,000 to offset future net unrelated business income. The carryforwards expire in approximately 10 to 20 years. The tax asset representing the value of the net operating loss carryforwards has been offset by a full valuation allowance as of December 31, 2019, because it is uncertain whether NWC's deferred tax assets will become available to offset future tax liabilities. NWC follows authoritative guidance relating to accounting for uncertain tax positions, which has no consolidated financial statement impact to NWC. NWC recognizes the tax benefit from uncertain tax positions only if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. NWC recognizes interest and penalties related to income tax matters in income tax expense. As of December 31, 2019 and 2018, NWC had no uncertain tax positions requiring accrual. NWC files an exempt organization and unrelated business income tax return with the Internal Revenue Service.”