First Community Credit Union

PART X, LINE 2:

“The credit union had no unrecognized tax positions as of december 31, 2016 and december 31, 2015. The credit union recognized no interest or penalties on the underpayment of income taxes during the years ended december 31, 2016 and december 31, 2015, and had no accrued interest penalties on the statement of financial condition as of december 31, 2016 and 2015. The credit union has no tax positions for which it is reaspnably possible that the total amounts of unrecognized tax benefits will significantly increase during the next twelve months. The irs and certain state taxing authorities are currently revisiting what, if any, products and services provided by state chartered credit unions 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 indicated that they are studying the issue and may issue additional guidance. As a result, at this time there is uncertainty regarding whether state charteered credit unions should pay income tax on certain types of net taxable income from activities that may be considerd by taxing authorties as unrelated to the purpose for which the credit union was granted non-taxable status. The credit union has not filed any tax returns in the past showing these activities as potential taxable activities. The taxing authorities have the ability to assess taxes, penalties nad 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 taxable income from activities deemed 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.”