Introduction to Mortgage Servicing Examinations Training - March 2023

Mortgage, LLC Notes to Consolidated Financial Statements (continued) (Dollars in Thousands)

11. Income Taxes

Mortgage, LLC and its subsidiaries are each single-member LLCs owned directly or indirectly by , a partnership. These single-member LLCs are treated as disregarded entities for U.S. federal income taxes and all their activity flows to . The partners of are responsible for the federal income tax liabilities, and therefore, no provision for federal income taxes is necessary. A provision for state income taxes is required for certain jurisdictions that tax these entities as regarded entities. See further details on the Mortgage structure and income taxes in Note 1, Business, Basis of Presentation and Accounting Policies. Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities. The deferred tax liability was $7,493 and $6,564 at December 31, 2021 and 2020, respectively, and resulted primarily from book to tax differences associated with IRLCs and MSRs, and other accruals and reserves. The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. After considering all those factors, as of December 31, 2021, the Company has recorded $19 as a full valuation allowance against the deferred tax assets on which are related to state net operating loss carryforwards with no expiration. No valuation allowance was recorded as of December 31, 2020. For the year ended December 31, 2021, the provision for income taxes is comprised of state income tax expense for Mortgage, LLC and For the year ended December 31, 2020, the provision for income taxes is comprised of state income tax expense for . No other entities have a provision for income taxes. The components of income tax expense included on the Company’s Consolidated Statements of Income were as follows for the years ended December 31, 2021 and 2020.

Year Ended December 31, 2021 2020

Current ............................................................................................................... $ Deferred ............................................................................................................. Provision for income taxes ................................................................................ $

2,747 $

16,085

929

6,579

3,676 $

22,664

The Company has evaluated the tax positions expected to be taken in the course of preparing its tax returns to determine whether the tax position will more likely than not be sustained by the Company upon challenge by the applicable taxing authority. Tax positions deemed to meet the more likely than not threshold and that would result in a tax benefit or expense to the Company would be recorded as a tax benefit or expense in the current period. For the years ended December 31, 2021 and 2020, the Company did not recognize any amounts for uncertain tax positions. The Company records interest and penalties related to uncertain income tax positions in income tax expense. No interest or penalties were recognized in income tax expense and no accrued interest or penalty was recorded related to uncertain income tax positions as of December 31, 2021 and 2020. Tax positions taken in tax years which remain open under the statute of limitations will be subject to examination by taxing authorities. With few exceptions, the Company is no longer subject to state and local examinations by taxing authorities for the tax years ended December 31, 2016 and prior. For the years ended December 31, 2021 and 2020, the Company distributed $5,329,857 and $4,681,619, respectively to, or for the benefit of, its holding company. Except for tax distributions, these distributions were at the discretion of the Board of Managers of Mortgage, are subject to the availability of cash and any applicable capital requirements or debt covenants, and included both tax and discretionary equity distributions. Subsequent to year end distributions of approximately $2.2 billion were made to .

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