Patelco Credit Union

“The Credit Union holds funds in escrow account in connection with the mortgage loans. THE CREDIT UNION COMPLIES WITH ALL FEDERAL & STATE LAWS REGARDING DISCLOSURES AND OPERATION OF THESE ACCOUNTS.”

“The Credit Union is a state-chartered credit union, as described in Internal Revenue Code 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 furtherance of its exempt purposes. However, IRS 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. During 2007, the IRS issued a series of technical advice memoranda (TAM) to a number of state-chartered credit unions located throughout the country. In light of the TAMs, the Credit Union has assessed its activities and any potential federal or state income tax liability. In the opinion of management, any liability arising from federal or 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 operations. Financial Accounting Standards Board ("FASB") Accounting Standard Codification ("ASC") 740-10-65, Income Taxes, 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 the Credit Union's tax returns to determine whether the tax positions are "more likely than not" of being sustained "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 expense and liability in the current year. For the years ended December 31, 2014 and 2013, management has determined that there are no material uncertain tax positions and, accordingly, has not recorded a liability for the payment of interest or penalties. the credit union is not subject to examinattion by U.S. federal and state tax authorities for the tax year before 2008.”