Novation Credit Union

PART X, LINE 2:

“The credit union is exempt, by statute, from federal income taxes. The credit union is a state-chartered credit union described in internal revenue code (irc) section 501(c)(14). As such, the credit union is exempt from federal taxation of income derived from the performance of activities that are in futherance of its exempt purposes. Irc section 511 imposes a tax on the unrelated business income (as defined in section 512) derived by state-chartered credit unions. Many states have similar laws. The specific application of section 512 to the various activities conducted by state-chartered credit unions has been at issue for many years. In the opinion of management, any liability arising from federal and state taxation of activities deemed to be unrelated to its exempt purposes is not expected to have a material effect on the credit union's financial position or results of operation. The financial accounting standards board (fasb) provides guidance for how uncertain tax positions should be recognized, measured, disclosed and presented in the financial statements. This requires the evaluation of tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions taken or expected to be taken in the course of preparing tax returns to determine whether the tax positions are more likely than not to be ustained when challenged or when examined by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense and liability in the current year. For the years ended september 30, 2020 and 2019, managment has determined that there are no uncertain tax positions.”