Meadows Credit Union

Schedule D, Part X, Line 2 FIN 48 (ASC 740) footnote

“The Credit Union is exempt, by statute, from federal and state income taxes. The Credit Union does, however, pay sales tax, property tax, payroll taxes, and federal and state income tax on unrelated business activities. The Internal Revenue Service (IRS) and certain taxing authorities are evaluating what, if any, products and services provided by state chartered credit unions or their credit union service organizations are subject to unrelated business income tax (UBIT). There is currently very little guidance in the IRS Code on what activities should be subject to UBIT. The IRS has issued certain technical advice memorandums identifying certain activities as being subject to 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 may be considered by taxing authorities as unrelated to the purpose for which credit unions were granted non-taxable status. The tax liability recorded by the Credit Union as of December 31, 2014 and 2013 attributed to unrelated business activities was not material. A tax position will be recognized as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized will be the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the "more likely than not" test, no tax benefit will be recorded. There is no accrual necessary at year-end 2014 and 2013. The Credit Union recognizes interest and/or penalties related to income tax matters in the operations section of the consolidated statement of income. No interest or penalties were incurred during 2014 and 2013.”