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1CUNA Mutual Group Proprietary Reproduction, Adaptation or Distribution Prohibited © CUNA Mutual Group
CMBS – CMIA Merger
Transaction Summary
April 30, 2010
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
• CMIC’s 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.
6
Financial Statement Treatment
• Contribution -
• Merger -
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