EXHIBIT 8.0
[LETTERHEAD OF MULDOON MURPHY & FAUCETTE LLP]
December 15, 2000
Board of Directors
Citizens First Bancorp, Inc.
525 Water Street
Port Huron, Michigan 48060
Board of Directors
Citizens First Savings Bank
525 Water Street
Port Huron, Michigan 48060
Re: Federal Tax Consequences of the Conversion of Citizens First Savings
Bank from a Michigan-chartered Mutual Savings Bank to a Michigan-
chartered Stock Savings Bank and the Offer and Sale of Common Stock of
Citizens First Bancorp, Inc. (the "Conversion")
To the Members of the Board of Directors:
You have requested an opinion regarding all the material federal income tax
consequences of the proposed conversion of Citizens First Savings Bank (the
"Bank") from a Michigan-chartered mutual savings bank to a Michigan-chartered
stock savings bank (the "Converted Bank") and the acquisition of the Converted
Bank's capital stock by Citizens First Bancorp, Inc., a Delaware corporation
(the "Holding Company"), pursuant to the plan of conversion adopted by the Board
of Directors on September 19, 2000 and subsequently amended on December 4, 2000
(the "Plan of Conversion").
The proposed transaction is described in the Prospectus and the Plan of
Conversion, and the tax consequences of the proposed transaction will be as set
forth in the section of this letter entitled "FEDERAL TAX OPINION."
Board of Directors
December 15, 2000
Page 2
We have made such inquiries and have examined such documents and records as
we have deemed appropriate for the purpose of this opinion. In rendering this
opinion, we have received factual representations of the Holding Company and the
Bank concerning the Holding Company and the Bank as well as the transaction (the
"Representations"). We will rely upon the accuracy of the Representations of the
Holding Company and the Bank and the statements of facts contained in the
examined documents, particularly the Plan of Conversion. We have also assumed
the authenticity of all signatures, the legal capacity of all natural persons
and the conformity to the originals of all documents submitted to us as copies.
Each capitalized term used herein, unless otherwise defined, has the meaning set
forth in the Plan of Conversion. We have assumed that the Conversion will be
consummated strictly in accordance with the terms of the Plan of Conversion.
The Plan of Conversion and the Prospectus contain a detailed description of
the Conversion. These documents as well as the Representations to be provided by
the Holding Company and the Bank are incorporated in this letter as part of the
statement of the facts.
The Bank, with its headquarters in Port Huron, Michigan, is a Michigan-
chartered mutual savings bank. As a mutual savings bank, the Bank has never been
authorized to issue stock. Instead, the proprietary interest in the reserves and
undivided profits of the Bank belong to the deposit account holders of the Bank,
hereinafter sometimes referred to as "shareholders." A shareholder of the Bank
has a right to share, pro rata, with respect to the withdrawal value of his
respective deposit account in any liquidation proceeds distributed in the event
the Bank is ever liquidated. In addition, a shareholder of the Bank is entitled
to interest on his account balance as fixed and paid by the Bank.
In order to provide organizational and economic strength to the Bank, the
Board of Directors has adopted the Plan of Conversion whereby the Bank will
convert itself into a Michigan-chartered stock savings bank, the stock of which
will be held entirely by the Holding Company. The Holding Company will acquire
the stock of the Converted Bank by purchase, in exchange for the Conversion
proceeds that are not permitted to be retained by the Holding Company. The
Holding Company will apply to the Office of Thrift Supervision to retain up to
50% of the proceeds received from the Conversion. The aggregate sales price of
the Common Stock issued in the Conversion will be based on an independent
appraiser's valuation of the estimated pro forma market value of the Holding
Company and the Converted Bank. The Conversion and sale of the Common Stock will
be subject to applicable regulatory approval and approval by the Bank's Members.
The Bank shall establish at the time of Conversion a liquidation account in
an amount equal to its net worth as of the latest practicable date prior to
Conversion. The liquidation account will be maintained by the Converted Bank for
the benefit of the Eligible Account Holders and Supplemental Eligible Account
Holders who continue to maintain their deposit accounts at the Converted Bank.
Board of Directors
December 15, 2000
Page 3
Each Eligible Account Holder and Supplemental Eligible Account Holder shall,
with respect to his Savings Account, hold a related inchoate interest in a
portion of the liquidation account balance, in relation to his deposit account
balance on the Eligibility Record Date and/or Supplemental Eligibility Record
Date or to such balance as it may be subsequently reduced, as provided in the
Plan of Conversion.
In the unlikely event of a complete liquidation of the Converted Bank (and
only in such event), following all liquidation payments to creditors (including
those to Account Holders to the extent of their deposit accounts), each Eligible
Account Holder and Supplemental Eligible Account Holder shall be entitled to
receive a liquidating distribution from the liquidation account, in the amount
of the then adjusted subaccount balance for his deposit accounts then held,
before any liquidation distribution may be made to any holders of the Converted
Bank's capital stock. No merger, consolidation, purchase of bulk assets with
assumption of Savings Accounts and other liabilities, or similar transaction
with a Federal Deposit Insurance Corporation institution, in which the Converted
Bank is not the surviving institution, shall be deemed to be a complete
liquidation for this purpose. In such transactions, the liquidation account
shall be assumed by the surviving institution.
LIMITATIONS ON OPINION
----------------------
Our opinions expressed herein are based solely upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), including applicable
regulations thereunder and current judicial and administrative authority. Any
future amendments to the Code or applicable regulations, or new judicial
decisions or administrative interpretations, any of which could be retroactive
in effect, could cause us to modify our opinion. No opinion is expressed herein
with regard to the federal, state, or city tax consequences of the Conversion
under any section of the Code except if and to the extent specifically
addressed.
FEDERAL TAX OPINION
-------------------
Based upon the Representations and the other factual information referred
to in this letter, and assuming the transaction occurs in accordance with the
Plan of Conversion, and taking into consideration the limitations noted
throughout this opinion, it is our opinion that under current federal income tax
law:
(1) Pursuant to the Conversion, the changes at the corporate level other
than changes in the form of organization will be insubstantial. Based
upon that fact and the fact that the equity interest of a shareholder
in a mutual entity is more nominal than real, unlike that of a
shareholder of a corporation, the Conversion of the Bank from a
Board of Directors
December 15, 2000
Page 4
mutual entity to a stock savings bank is a tax-free reorganization
since it is a mere change in identity, form or place of organization
within the meaning of section 368(a)(1)(F) of the Code (see Rev. Rul.
80-105, 1980-1 C.B. 78). Neither the Bank nor the Converted Bank shall
recognize gain or loss as a result of the Conversion. The Bank and the
Converted Bank shall each be "a party to a reorganization" within the
meaning of section 368(b) of the Code.
(2) No gain or loss shall be recognized by the Converted Bank or the
Holding Company on the receipt by the Converted Bank of money from the
Holding Company in exchange for shares of the Converted Bank's capital
stock or by the Holding Company upon the receipt of money from the
sale of its Common Stock (Section 1032(a) of the Code).
(3) The basis of the assets of the Bank in the hands of the Converted Bank
shall be the same as the basis of such assets in the hands of the Bank
immediately prior to the Conversion (Section 362(b) of the Code).
(4) The holding period of the assets of the Bank in the hands of the
Converted Bank shall include the period during which the Bank held the
assets (Section 1223(2) of the Code).
(5) No gain or loss shall be recognized by the Eligible Account Holders
and the Supplemental Eligible Account Holders of the Bank on the
issuance to them of withdrawable deposit accounts in the Converted
Bank plus interests in the liquidation account of the Converted Bank
in exchange for their deposit accounts in the Bank or to the other
depositors on the issuance to them of withdrawable deposit accounts
(Section 354(a) of the Code).
(6) Provided that the amount to be paid for such stock pursuant to the
subscription rights is equal to the fair market value of the stock, no
gain or loss will be recognized by Eligible Account Holders and
Supplemental Eligible Account Holders upon the distribution to them of
the nontransferable subscription rights to purchase shares of stock in
the Holding Company (Section 356(a)). Gain realized, if any, by the
Eligible Account Holders and Supplemental Eligible Account Holders on
the distribution to them of nontransferable subscription rights to
purchase shares of Common Stock will be recognized but only in an
amount not in excess of the fair market value of such subscription
rights (Section 356(a)). Eligible Account Holders and Supplemental
Eligible Account Holders will not realize any taxable income as
Board of Directors
December 15, 2000
Page 5
a result of the exercise by them of the nontransferable subscription
rights (Rev. Rul. 56-572, 1956-2 C.B. 182).
(7) The basis of the deposit accounts in the Converted Bank to be received
by the Eligible Account Holders, Supplemental Eligible Account Holders
and other shareholders of the Bank will be the same as the basis of
their deposit accounts in the Bank surrendered in exchange therefor
(Section 358(a)(1) of the Code). The basis of the interests in the
liquidation account of the Converted Bank to be received by the
Eligible Account Holders and Supplemental Eligible Account Holders of
the Bank shall be zero (Rev. Rul. 71-233, 1971-1 C.B. 113). The basis
of the Holding Company Common Stock to its stockholders will be the
purchase price thereof plus the basis, if any, of nontransferable
subscription rights (Section 1012 of the Code). Accordingly, assuming
the nontransferable subscription rights have no value, the basis of
the Common Stock to the Eligible Account Holders and Supplemental
Eligible Account Holders will be the amount paid therefor. The holding
period of the Common Stock purchased pursuant to the exercise of
subscription rights shall commence on the date on which the right to
acquire such stock was exercised (Section 1223(6) of the Code).
Our opinion under paragraph (6) above is predicated on the Representation
that no person shall receive any payment, whether in money or property, in lieu
of the issuance of subscription rights. Our opinion under paragraphs (6) and (7)
above assumes that the subscription rights to purchase shares of Common Stock
received by Eligible Account Holders and Supplemental Eligible Account Holders
have no fair market value. We understand that you have received a letter from
Keller & Company, Inc. that the subscription rights do not have any value. We
express no view regarding the valuation of the subscription rights.
If the subscription rights are subsequently found to have a fair market
value, income may be recognized by various recipients of the subscription rights
(in certain cases, whether or not the rights are exercised) and Holding Company
and/or the Converted Bank may be taxable on the distribution of the subscription
rights.
* * *
Since this letter is rendered in advance of the closing of this
transaction, we have assumed that the transaction will be consummated in
accordance with the Plan of Conversion as well as all the information and
Representations referred to herein. Any change in the transaction could cause us
to modify our opinion.
Board of Directors
December 15, 2000
Page 6
We consent to the inclusion of this opinion as an exhibit to the Form AC
Application for Conversion of the Bank and the references to and summary of this
opinion in such Application for Conversion. We also consent to the inclusion of
this opinion as an exhibit to the Form S-1 Registration Statement and the Form
H-(e)1-S Application of the Holding Company and the references to and summary of
this opinion in both the Form S-1 and the Form H-(e)1-S.
Sincerely,
/s/ Muldoon Murphy & Faucette LLP
MULDOON MURPHY & FAUCETTE LLP