Pacific Gateway Center

Part X, Line 2:

“The Center is tax-exempt under Section 501(c)(3) of the Internal Revenue Code. The Center has no unrecognized tax benefits at September 30, 2017. The Corporation is a for-profit entity subject to federal and Hawaii state income taxes. Income taxes are recognized for the amount of taxes payable or refundable for the current year, and deferred tax liabilities and assets are recognized for the future tax consequences of transactions that have been recognized in the Center's consolidated financial statements or tax returns. A valuation allowance is provided when it is more likely than not that some portion or the entire deferred tax asset will not be realized. At September 30, 2017 and for the year then ended, deferred income taxes were not material to the Center's consolidated financial statements and, accordingly, were not recorded. The Center and the Corporation have adopted the provisions of Financial Accounting Standards Board Accounting Standards Codification 740-10-25, Accounting for Uncertainty in Income Taxes, which requires the Center and the Corporation to recognize the tax benefit associated with tax taken for tax return purposes when it is more likely than not the position will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are recognized in the period which the change in judgment occurs. The Center and the Corporation do not believe their consolidated financial statements include any uncertain tax positions. The Center's and the Corporation's federal and state income tax returns prior to fiscal years 2014 and 2013, respectively, are closed. Management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. When necessary, the Center and the Corporation recognize interest and penalties associated with tax matters, if applicable, as part of income tax expense and include accrued interest and penalties with the related tax liability in the consolidated statement of financial position.”