Texas Alliance of Energy Producers

PART X, LINE 2:

“The alliance is a not-for-profit organization that is exempt from federal income taxes under section 501(c)(6) of the internal revenue code. As a result, no provision for current or deferred income tax liability is recognized in the alliances books and records. The alliance follows the provisions of fasb asc 740, income taxes, which requires extensive disclosures about uncertain income tax positions. This standard seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. The alliance evaluates any uncertain tax positions using the provisions of fasb asc 450, contingencies. Accordingly, a loss contingency is recognized when it is probable that a liability has been incurred as of the date of the consolidated financial statements and the amounts of the loss can be reasonably estimated. The amount recognized is subject to estimate and management judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. The alliance does not believe that they have engaged in any activity that would result in any uncertain tax positions. As a result, management does not believe that any uncertain tax positions currently exist, and no loss contingency has been recognized in the accompanying consolidated financial statements. Federal income tax statutes dictate that tax returns filed in any of the previous three reporting periods remain open to examination. Currently, the alliance has no open examinations with the internal revenue service. The alliance's policy is to record any income tax related penalties and interest incurred as an operating expense when paid. There were no income tax related penalties or interest included in the accompanying consolidated financial statements. The alliance has historically had no unrelated business income subject to taxation.”