Exhibit 8.1
[LUSE LEHMAN LETTERHEAD]
FORM OF FEDERAL TAX OPINION
_______________, 2002
Board of Directors
Atlantic Liberty Savings, F.A.
186 Montague Street
Brooklyn, New York 11202-3601
Re: Federal Income Tax Consequences Relating to Conversion of the
Association from a Federal Mutual Savings and Loan Association
to a Federal Stock Savings and Loan Association and the
Acquisition of the Stock Institution's Stock by a Stock
Holding Company
Gentlemen:
In accordance with your request, set forth herein is the opinion of
this firm relating to the federal income tax consequences of the proposed
conversion of Atlantic Liberty Savings, F.A. (the "Association") from a federal
mutual savings and loan association to a federal stock savings association (the
"Stock Association"), and the acquisition of the Stock Association's capital
stock by Atlantic Liberty Financial Corp. (the "Holding Company"), pursuant to
the plan of conversion adopted by the Board of Directors on April 17, 2002 (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 "OPINION."
For purposes of this opinion, we have examined such documents and
questions of law as we have considered necessary or appropriate.
In issuing our opinion, we have assumed that the Plan of Conversion has
been duly and validly authorized and has been approved and adopted by the board
of directors of the Association at a meeting duly called and held; that the
Association will comply with the terms and conditions of the Plan of Conversion,
and that the various representations and warranties which are provided to us are
accurate, complete, true and correct. Accordingly, we express no opinion
concerning the effect, if any, of variations from the foregoing. We specifically
express no opinion concerning tax matters relating to the Plan of Conversion
under state and local tax laws and under federal income tax laws except on the
basis of the documents and assumptions described above. Capitalized terms used
herein but not defined herein shall have the same meaning as set forth in the
Plan of Conversion.
Board of Directors
Atlantic Liberty Savings, F.A.
____________, 2002
Page 2
For purposes of this opinion, we are also relying on the
representations as to factual matters that were provided to us by the
Association
In issuing the opinion set forth below, we have relied solely on
existing provisions of the Internal Revenue Code of 1986, as amended (the
"Code"); existing and proposed Treasury Regulations (the "Regulations")
thereunder; current administrative rulings, notices and procedures; and court
decisions. Such laws, regulations, administrative rulings, notices and
procedures and court decisions are subject to change at any time. Any such
change could affect the continuing validity of the opinions set forth below.
This opinion is as of the date hereof, and we disclaim any obligation to advise
you of any change in any matter considered herein after the date hereof.
The Association, with its headquarters in Brooklyn, New York, is a
federally-chartered mutual savings and loan association. As a mutual savings and
loan association, the Association has never been authorized to issue stock.
Instead, the proprietary interest in the reserves and undivided profits of the
Association belong to the deposit account holders of the Association,
hereinafter sometimes referred to as "depositors." A depositor of the
Association 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 Association is ever liquidated. In addition, a depositor of the
Association is entitled to interest in his account balance as fixed and paid by
the Association.
In order to provide organizational and economic strength to the
Association, the Board of Directors has adopted the Plan of Conversion whereby
the Association will convert itself into a federally-chartered stock savings
association, the stock of which will be held entirely by the Holding Company.
The Holding Company will acquire the stock of the Stock Association by purchase,
in exchange for a portion of the proceeds from the Conversion. The Holding
Company will apply to the Office of Thrift Supervision ("OTS") to retain up to
50% of the proceeds received from the Conversion. The aggregate sales price of
the Conversion Stock will be based on an independent appraiser's valuation of
the estimated pro forma market value of the Holding Company and the Stock
Association. The Conversion and sale of the Conversion Stock will be subject to
the applicable regulatory approval and the approval by the affirmative vote of a
majority of the Members of the Association.
The Association 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 Stock
Association for the benefit of the Eligible Account Holders and Supplemental
Eligible Account Holders who continue to maintain their deposit accounts at the
Stock Association. Each Eligible Account Holder and Supplemental Eligible
Account Holder shall, with respect to his Deposit 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.
Board of Directors
Atlantic Liberty Savings, F.A.
____________, 2002
Page 3
In the unlikely event of a complete liquidation of the Stock
Association (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 Stock Association'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
("FDIC") institution, in which the Stock Association 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.
Following the Conversion, voting rights in the Stock Association will
rest exclusively with the shareholder of stock in the Stock Association, which
will be the Holding Company. Voting rights in the Holding Company will rest
exclusively with the holders of its capital stock. The Conversion will not
interrupt the business of the Association, and its business will continue as
usual under the Stock Association. Each depositor will retain a withdrawable
savings account or accounts equal in dollar amount to, and on the same terms and
conditions as, the withdrawable account or accounts at the time of the
Conversion, except to the extent funds or deposits are used to pay for Holding
Company Conversion Stock. All loans of the Association will remain unchanged and
retain their same characteristics in the Stock Association after the Conversion.
Following the Conversion, the Stock Association will continue to engage in the
same business as the Association immediately prior to the Conversion, and the
Stock Association will continue to have its savings accounts insured by the
Federal Deposit Insurance Corporation up to applicable limits.
Immediately prior to the Conversion, the Association will have a
positive net worth determined in accordance with generally accepted accounting
principles.
LIMITATIONS ON OPINION
Our opinions expressed herein are based upon current provisions of the
Internal Revenue Code of 1986, as amended ("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.
Board of Directors
Atlantic Liberty Savings, F.A.
____________, 2002
Page 4
OPINION
Based on the foregoing, and in reliance thereon, and subject to the
conditions stated herein, it is our opinion that the following federal income
tax consequences will result from the proposed Conversion:
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 Association from a 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
Association nor the Stock Association shall recognize gain or
loss as a result of the Conversion. The Association and the
Stock Association 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 Stock Association
or the Holding Company on the receipt by the Stock Association
of money from the Holding Company in exchange for shares of
the Stock Association'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 Association in the hands of the
Stock Association shall be the same as the basis of such
assets in the hands of the Association immediately prior to
the Conversion (Section 362(b) of the Code).
4. The holding period of the assets of the Association in the
hands of the Stock Association shall include the period during
which the Association 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
Association on the issuance to them of withdrawable deposit
accounts in the Stock Association plus interests in the
liquidation account of the Stock Association in exchange for
their deposit accounts in the Association or to the other
depositors on the issuance to them of withdrawable deposit
accounts (Section 354(a) of the Code).
Board of Directors
Atlantic Liberty Savings, F.A.
____________, 2002
Page 5
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 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 Stock Association to
be received by the Eligible Account Holders, Supplemental
Eligible Account Holders and other shareholders of the
Association will be the same as the basis of their deposit
accounts in the Association surrendered in exchange therefor
(Section 358(a)(1) of the Code). The basis of the interests in
the liquidation account of the Stock Association to be
received by the Eligible Account Holders and Supplemental
Eligible Account Holders of the Association 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, Supplemental Eligible Account Holders and
Other Members have a fair market value of zero. We understand that you have
received a letter from Feldman Financial Advisors, Inc. that the subscription
rights do not have any value. We express no view regarding the valuation of the
subscription rights.
Board of Directors
Atlantic Liberty Savings, F.A.
____________, 2002
Page 6
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 the Holding
Company and/or the Stock Association may be taxable on the distribution of the
subscription rights.
CONSENT
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement on Form S-1 ("Registration Statement") of the Holding
Company filed with the Securities and Exchange Commission with respect to the
Conversion and as an exhibit to the Application for Conversion on Form AC ("Form
AC") of the Association filed with the OTS with respect to the Conversion. We
also hereby consent to the references to this firm in the prospectus which is a
part of both the Registration Statement and the Form AC.
USE OF OPINION
This opinion is rendered for the benefit of the Holding Company, the
Association and purchasers of the Holding Company Conversion Stock in the
Conversion and is not to be relied upon or used for any other purpose without
our prior written consent.
Very truly yours,
LUSE GORMAN POMERENK & SCHICK
A Professional Corporation