EXHIBIT 8.2 DRAFT OPINION OF FONTANELLA AND BABITTS RE: STATE TAX MATTERS
[LETTERHEAD OF FONTANELLA AND BABITTS APPEARS HERE]
[DRAFT]
Board of Directors
West Essex Bank, FSB
417 Bloomfield Avenue
Caldwell, New Jersey 07006
Re: New Jersey Tax Opinion relating to Reorganization of the West Essex Bank,
FSB (the "Bank") from a federally-chartered mutual savings bank to a two
tier mutual holding company structure in which the Mutual Company, Bancorp,
and Stock Bank will be chartered and regulated by the OTS.
Gentlemen:
You have requested our opinion relating to the New Jersey tax consequences of
the proposed reorganization adopted by the Board of Directors of the Bank, on
March 18, 1998, of the Bank to a two tier mutual holding company structure in
which the Mutual Company, Bancorp, and Stock Bank will be chartered and
regulated by the OTS.
The proposed transaction and its federal income tax consequences are described
in an opinion letter from Muldoon, Murphy & Faucette dated __________________,
(the "Federal Opinion Letter"). The facts, assumptions, and representations set
forth in the Opinion Letter and the federal tax consequences set forth in the
Opinion Letter are incorporated in this opinion letter by reference as if fully
set forth herein. References and abbreviations used in the Federal Opinion
Letter are also used herein.
SUPPLEMENTAL REPRESENTATIONS
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In addition to the facts, assumptions, and representations set forth in the
Federal Opinion letter, you have provided the following additional
representations concerning the Reorganization.
1. The Bank is subject to and has been filing returns and paying tax under
the New Jersey Savings Institution Tax Act, N.J.S.A.54:01D-1, et seq.
(the "SIT").
2. The transfer of tangible personal property by the Bank to the Stock Bank,
in connection with the Reorganization, will not be in the ordinary course
of the Bank's business and will be in exchange solely for the common stock
of the Stock Bank.
3. The real property transferred by the Bank to the Stock Bank in connection
with the Reorganization will not be subject to any mortgage, lien or
encumbrance.
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[DRAFT]
Board of Directors
West Essex Bank, FSB
OPINION
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Based solely on the facts, assumptions, and representations set forth in the
Federal Opinion Letter and the foregoing supplemental representations and
assuming the Reorganization occurs in accordance with the Plan of
Reorganization, it is our opinion that:
1. To the extent that consummation of the Reorganization will not result in
the recognition of gain or loss by the Bank and other transferors and will
otherwise qualify as "tax free" under the Internal Revenue Code of 1986, as
amended (the "Code"), all as more fully described in the Federal Opinion
Letter, consummation of the Reorganization will not result in any
additional tax liabilities under the SIT.
Except for certain state adjustments under the SIT which are not impacted
by consummation of the Reorganization, the SIT is imposed on a taxpayer's
net income, which is deemed to be federal taxable income before net
operating loss deduction and special deductions N.J.S.A.54:10D-2(d).
Accordingly, since the SIT is based on federal taxable income, the
nonrecognition events, carryovers, and tax-free exchanges under federal
income tax law resulting from the Reorganization, all as more fully
described in the Federal Opinion Letter, will be afforded the same
treatment for purposes of the SIT.
2. The transfer by the Bank of substantially all of its assets and liabilities
in exchange for common stock of the Stock Bank will not result in any
liability under the New Jersey Sales and Use Tax Act, N.J.S.A.54:32B-1 et
seq. (the "Sales and Use Tax").
The Sales and Use Tax specifically exempts, as a taxable transaction, the
transfer of tangible personal property to a corporation upon its
organization in consideration for the issuance of its stock.N.J.S.A.54:32B-
2(e)(4)(E).
3. For New Jersey income tax purposes, the Bank's depositors will recognize no
gain or loss by reason of the Reorganization.
4. It is uncertain whether the transfer of real property by the Bank to the
Stock Bank, in connection with the Reorganization, will subject the
transfer of such real property to the New Jersey Realty Transfer Fee law,
N.J.S.A.46:15-5 et seq. (the "Realty
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[DRAFT]
Board of Directors
West Essex Bank,FSB
Transfer Fee"). The Realty Transfer Fee is a fee on the transfer of real
property which must be paid as a prerequisite for the recording of all
deeds for non-exempt realty transfers. It is imposed on the grantor at the
rate of $1.75 for each $500 in consideration or fraction thereof. For each
$500 in consideration, in excess of $150,000, the Realty Transfer Fee rises
to $2.50 per $500 consideration. "Consideration" is equal to the actual
amount of money and the "monetary value of any other thing of value"
constituting the compensation paid or to be paid for the transfer of title.
Included in the definition of consideration is the amount of any mortgage,
lien, or other encumbrance to which the transfer is subject or which is to
be assumed or agreed to be paid by the grantee. N.J.S.A.46:15-5(C) and
N.J.S.A.46:15-7.
New Jersey may take the position that the common stock of the Stock Bank
received by the Bank in exchange for the real property transferred by the Bank
to the Stock Bank in connection with the Reorganization constitute consideration
under the Realty Transfer Fee. New Jersey would consider the value of the
consideration to be the assessed value of the transferred real property for
local property tax purposes.
* * * * *
Since this letter is provided in advance of the closing of the transactions
contemplated by the Reorganization, we have assumed that such transactions will
be consummated in accordance with the Plan of Reorganization, as well as the
information and representations referred to herein. Any change in the
Reorganization could cause us to modify the opinions expressed herein.
The opinions expressed herein are based solely on current New Jersey tax law,
including applicable regulations thereunder, and current judicial and
administrative authority. Any future amendments to the tax statutes cited
herein or applicable regulations, or new judicial decisions or administrative
interpretations, many of which could be retroactive in effect, could cause us to
modify the opinions expressed herein.
We express no opinion with respect to the tax treatment of the Reorganization
under the Code or any other law of the State of New Jersey not specifically
addressed herein or the law of any other state or locality, or to the tax
treatment of any conditions existing at the time of, or effects resulting from,
the Reorganization which are not specifically covered by the items set forth in
this opinion letter.
Very truly yours,
Fontanella and Babitts
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