2 The Transaction – Share Contribution Followed by Subsidiary-Parent Merger 1.Currently, CMIC owns 100% of CMBS and CMIA. On 5/30, CMIC contributes. CMBS stock to CMIA 2.Immediately following the contribution, CMBS is merged into CMIA 3.Final Structure CMBS Stock CUNA Mutual Insurance Corp (CMIC) CUNA Mutual Business Services, Inc. (CMBS) CUNA Mutual Insurance Agency, Inc. (CMIA) Merge CMBS into CMIA CUNA Mutual Insurance Corp (CMIC) CUNA Mutual Business Services, Inc. (CMBS) CUNA Mutual Insurance Agency, Inc. (CMIA) CUNA Mutual Insurance Corp (CMIC) CUNA Mutual Insurance Agency, Inc. (CMIA)
3 Benefits of Restructuring Addresses a customer service issue – perceived inconsistent sales tax treatment for deposit document (CMBS Product) and lending document products (CMIS Product) Aligns the Deposit Document business with the Lending Document business within the CMIA legal entity Creates resource efficiencies - Elimination of entity reduces required financial reporting and tax compliance resources needs
4 Tax Treatment CMICs contribution of CMBS stock to CMIA qualifies for non- recognition treatment under IRC §351 Merger of CMBS into CMIA qualifies qualifies as a tax-free subsidiary-parent merger under IRC §368(a)(1)(A)____ CMIA assumes carryover basis CMBS tax attributes carryover to CMIA in accordance with IRC §381(c)(__)
5 Tax Risk Assessment Merger – Potential Continuity of business enterprise requirement (COBE) risk, which is viewed as a marginal risk, is addressed by structuring as a S-P merger. ___ (case) provides authority for recasting a failed S-P merger as a tax-free IRC §332 subsidiary liquidation Strong position for tax-free treatment in primary and secondary position. In the unlikely event the first and second position were successfully challenged and the transaction was deemed taxable upon exam, gain would be deferred under the provisions of Treas Reg §1.1502-13.