Exhibit 8.1
Opinion of Silver, Freedman & Taff, L.L.P.
with respect to Federal income tax consequences
of the Conversion
[SILVER, FREEDMAN & TAFF, L.L.P. LETTERHEAD]
October 29, 1998
Board of Trustees
Cohoes Savings Bank
75 Remsen Street
Cohoes, New York 12047
RE: Federal Income Tax Opinion Relating To The Conversion Of
Cohoes Savings Bank From A State-Chartered Mutual Savings
Institution To A State-Chartered Stock Savings Institution
Under Section 368(a)(1)(F) of the Internal Revenue Code of
1986, As Amended
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Gentlemen:
In accordance with your request set forth hereinbelow is the opinion of
this firm relating to the federal income tax consequences of the conversion of
Cohoes Savings Bank ("Mutual") from a New York chartered mutual savings
institution to a New York chartered stock savings institution ("Stock
Institution") pursuant to the provisions of Section 368(a)(1)(F) of the Internal
Revenue Code of 1986, as amended (the "Code").
Capitalized terms used herein which are not expressly defined herein
shall have the meaning ascribed to them in the Plan of Conversion dated May 21,
1998 (the "Plan").
The following assumptions have been made in connection with our
opinions hereinbelow:
1. The Conversion is implemented in accordance with the terms of the
Plan and all conditions precedent contained in the Plan shall be performed or
waived prior to the consummation of the Conversion.
Board of Trustees
Cohoes Savings Bank
October 29, 1998
Page 2
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2. No amount of the savings accounts and deposits of Mutual, as of the
Eligibility Record Date or the Supplemental Eligibility Record Date, will be
excluded from participating in the liquidation account of Stock Institution. To
the best of the knowledge of the management of Mutual there is not now, nor will
there be at the time of the Conversion, any plan or intention, on the part of
the depositors in Mutual to withdraw their deposits following the Conversion.
Deposits withdrawn immediately prior to or immediately subsequent to the
Conversion (other than maturing deposits) are considered in making these
assumptions.
3. Holding Company and Stock Institution each have no plan or intention
to redeem or otherwise acquire any of the Holding Company Common Stock to be
issued in the proposed transaction.
4. Immediately following the consummation of the proposed transaction,
Stock Institution will possess the same assets and liabilities as Mutual held
immediately prior to the proposed transaction, plus substantially all of the net
proceeds from the sale of its stock to Holding Company except for assets used to
pay expenses of the Conversion. The liabilities transferred to Stock Institution
were incurred by Mutual in the ordinary course of business.
5. No cash or property will be given to deposit account holders in lieu
of Subscription Rights or an interest in the liquidation account of Stock
Institution.
6. Following the Conversion, Stock Institution will continue to engage
in its business in substantially the same manner as Mutual engaged in business
prior to the Conversion, and it has no plan or intention to sell or otherwise
dispose of any of its assets, except in the ordinary course of business.
7. There is no plan or intention for Stock Institution to be liquidated
or merged with another corporation following the consummation of the Conversion.
Board of Trustees
Cohoes Savings Bank
October 29, 1998
Page 3
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8. The fair market value of each savings account plus an interest in
the liquidation account of Stock Institution will, in each instance, be
approximately equal to the fair market value of each savings account of Mutual
plus the interest in the residual equity of Mutual surrendered in exchange
therefor.
9. Holding Company has no plan or intention to sell or otherwise
dispose of the stock of Stock Institution received by it in the proposed
transaction.
10. Both Stock Institution and Holding Company have no plan or
intention, either currently or at the time of Conversion, to issue additional
shares of common stock following the proposed transaction, other than (a) shares
that may be issued to employees, directors and/or trustees pursuant to certain
stock option and stock incentive plans or that may be issued to employee benefit
plans and (b) up to 3% of Holding Company Common Stock to the Cohoes Savings
Foundation, a charitable organization created under Section 501(c)(3) of the
Code (the "Foundation").
11. Assets used to pay expenses of the Conversion and all distributions
(except for regular, normal interest payments and other payments in the normal
course of business made by Mutual immediately preceding the transaction) will in
the aggregate constitute less than 1% of the net assets of Mutual, and any such
expenses and distributions will be paid from the proceeds of the sale of Holding
Company Common Stock.
12. All distributions to deposit account holders in their capacity as
deposit account holders (except for regular, normal interest payments made by
Mutual), will, in the aggregate, constitute less than 1% of the fair market
value of the net assets of Mutual.
13. At the time of the proposed transaction, the fair market value of
the assets of Mutual on a going concern basis (including intangibles) will equal
or exceed the amount of its liabilities plus the amount of liabilities to which
such assets are subject. Mutual will have a positive regulatory net worth at the
time of the Conversion.
14. Mutual is not under the jurisdiction of a court in a Title 11 or
similar case
Board of Trustees
Cohoes Savings Bank
October 29, 1998
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within the meaning of Section 368(a)(3)(A) of the Code. The proposed transaction
does not involve a receivership, foreclosure, or similar proceeding before a
federal or state agency involving a financial institution to which Section 585
of the Code applies.
15. Mutual's Eligible Account Holders and Supplemental Eligible Account
Holders will pay expenses of the Conversion solely attributable to them, if any.
16. The liabilities of Mutual assumed by Stock Institution plus the
liabilities, if any, to which the transferred assets are subject were incurred
by Mutual in the ordinary course of its business and are associated with the
assets being transferred.
17. There will be no purchase price advantage for Mutual's deposit
account holders who purchase Holding Company Common Stock.
18. None of the compensation to be received by any deposit account
holder- employees of Mutual or Holding Company will be separate consideration
for, or allocable to, any of their deposits in Mutual. No interest in the
liquidation account of Stock Institution will be received by any deposit account
holder-employee as separate consideration for, or will otherwise be allocable
to, any employment agreement, and the compensation paid to each deposit account
holder-employee, during the twelve-month period preceding or subsequent to the
Conversion, will be for services actually rendered and will be commensurate with
amounts paid to the third parties bargaining at arm's-length for similar
services. No shares of Holding Company Common Stock will be issued to or
purchased by any deposit account holder-employee of Mutual or Holding Company at
a discount or as compensation in the proposed transaction.
19. No creditors of Mutual or the depositors in their role as
creditors, have taken any steps to enforce their claims against Mutual by
instituting bankruptcy or other legal proceedings, in either a court or
appropriate regulatory agency, that would eliminate the proprietary interests of
depositors prior to the Conversion of Mutual as the equity holders of Mutual.
20. The proposed transaction does not involve the payment to Stock
Institution
Board of Trustees
Cohoes Savings Bank
October 29, 1998
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or Mutual of financial assistance from federal agencies within the meaning of
Notice 89-102, 1989-40 C.B. 1.
21. On a per share basis, the purchase price of Holding Company Common
Stock will be equal to the fair market value of such stock at the time of the
completion of the proposed transaction.
22. Mutual has received or will receive an opinion from RP Financial
LC. ("Appraiser's Opinion"), which concludes that the Subscription Rights to be
received by Eligible Account Holders, Supplemental Eligible Account Holders and
other eligible subscribers do not have any ascertainable fair market value,
since they are acquired by the recipients without cost, are non-transferable and
of short duration, and afford the recipients a right only to purchase Holding
Company Common Stock at a price equal to its estimated fair market value, which
will be the same price as the Public Offering Price for unsubscribed shares of
Holding Company Common Stock.
23. Mutual will not have any net operating losses, capital loss
carryovers or built-in losses at the time of the Conversion.
As part of the Conversion, Holding Company intends to donate to the
Foundation up to 3% shares of its common stock.
The Plan states that the Foundation is intended to complement Mutual's
existing community reinvestment activities and to support the communities in
which Mutual operates.
The Foundation will be dedicated to the promotion of charitable
purposes within the communities in which Mutual operates, including, but not
limited to grants or donations to support not-for-profit medical facilities,
cultural activities, community groups and other types of organizations or
projects. The Foundation will annually distribute total grants and donations to
assist charitable organizations or to fund projects of not less than five
percent (5%) of its net investment assets.
Board of Trustees
Cohoes Savings Bank
October 29, 1998
Page 6
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OPINION
Based solely on the assumptions set forth hereinabove and our analysis
and examination of applicable federal income tax laws, rulings, regulations,
judicial precedents and the Appraiser's Opinion, we are of the opinion that if
the transaction is undertaken in accordance with the above assumptions:
(1) The Conversion will constitute a reorganization within the meaning
of Section 368(a)(1)(F) of the Code. Neither Mutual nor Stock Institution will
recognize any gain or loss as a result of the transaction (Rev. Rul. 80-105,
1980-1 C.B. 78). Mutual and Stock Institution will each be a party to a
reorganization within the meaning of Section 368(b) of the Code.
(2) Stock Institution will recognize no gain or loss upon the receipt
of money and other property, if any, in the Conversion, in exchange for its
shares. (Section 1032(a) of the Code.)
(3) No gain or loss will be recognized by Holding Company upon the
receipt of money for Holding Company Common Stock. (Section 1032(a) of the
Code.)
(4) The basis of Mutual's assets in the hands of Stock Institution will
be the same as the basis of those assets in the hands of Mutual immediately
prior to the transaction. (Section 362(b) of the Code.)
(5) Mutual, Stock Institution and Holding Company are each corporations
within the meaning of Section 7701(a)(3) of the Code.
(6) Mutual and Stock Institution are not investment companies as
defined in Sections 368(a)(2)(F)(iii) and (iv) of the Code.
(7) Stock Institution's holding period of the assets of Mutual will
include the period during which such assets were held by Mutual prior to the
Conversion. (Section 1223(2) of the Code).
Board of Trustees
Cohoes Savings Bank
October 29, 1998
Page 7
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(8) The tax year of Mutual will not end on the effective date of the
Conversion. The part of the tax year of Mutual before the Conversion will be
includible in the tax year of Stock Institution after the Conversion. Therefore,
Mutual will not have to file a federal income tax return for the portion of the
tax year prior to the Conversion. (Rev. Rul. 57-276, 1957-1 C.B. 126).
(9) Depositors will realize gain, if any, upon the constructive
issuance to them of withdrawable deposit accounts of Stock Institution,
Subscription Rights and/or interests in the liquidation account of Stock
Institution. Any gain resulting therefrom will be recognized, but only in an
amount not in excess of the fair market value of the liquidation accounts and/or
Subscription Rights received. The liquidation accounts will have nominal, if
any, fair market value. Based solely on the accuracy of the conclusion reached
in the Appraiser's Opinion, and our reliance on such opinion, that the
Subscription Rights have no value at the time of distribution or exercise, no
gain or loss will be required to be recognized by depositors upon receipt or
distribution of Subscription Rights. (Section 1001 of the Code); See Paulsen v.
Commissioner, 469 U.S. 131,139 (1985). Likewise, based solely on the accuracy of
the aforesaid conclusion reached in the Appraiser's Opinion, and our reliance
thereon, we give the following opinions: (a) no taxable income will be
recognized by the trustees, officers and employees of Mutual upon the
distribution to them of Subscription Rights or upon the exercise or lapse of the
Subscription Rights to acquire Holding Company Common Stock at fair market
value; (b) no taxable income will be realized by the depositors of Mutual as a
result of the exercise or lapse of the Subscription Rights to purchase Holding
Company Common Stock at fair market value (Rev. Rul. 56-572, 1956-2 C.B. 182);
and (c) no taxable income will be realized by Mutual, Stock Institution or
Holding Company on the issuance or distribution of Subscription Rights to
depositors of Mutual to purchase shares of Holding Company Common Stock at fair
market value. (Section 311 of the Code.)
Notwithstanding the Appraiser's Opinion, 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 Stock Institution may be
taxable on the distribution of the Subscription Rights. (Section 311 of the
Code). In this regard, the Subscription Rights may be taxed partially or
entirely at ordinary income tax rates.
Board of Trustees
Cohoes Savings Bank
October 29, 1998
Page 8
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(10) The creation of the liquidation account on the records of Stock
Institution will have no effect on Mutual's or Stock Institution's taxable
income, deductions, or tax bad debt reserve.
(11) A depositor's basis in the savings deposits of Stock Institution
will be the same as the basis of his savings deposits in Mutual. (Section 1012
of the Code). Based upon the Appraiser's Opinion, the basis of the Subscription
Rights will be zero. The basis of the interest in the liquidation account of
Stock Institution received by Eligible Account Holders and Supplemental Eligible
Account Holders will be equal to the cost of such property, i.e., the fair
market value of the proprietary interest in Mutual, which in this transaction we
assume to be zero.
(12) The basis of Holding Company Common Stock to its shareholders will
be the purchase price thereof. (Section 1012 of the Code).
(13) Regardless of any book entries that are made for the establishment
of a liquidation account, the reorganization will not diminish the accumulated
earnings and profits of Mutual available for the subsequent distribution of
dividends, within the meaning of Section 316 of the Code. (Section 1.312-11(b)
and (c) of the Regulations). Stock Institution will succeed to and take into
account the earnings and profits or deficit in earnings and profits, of Mutual
as of the date of Conversion.
The above opinions are effective to the extent that Mutual is solvent.
No opinion is expressed about the tax treatment of the transaction if Mutual is
insolvent. Whether or not Mutual is solvent will be determined at the end of the
taxable year in which the transaction is consummated.
Board of Trustees
Cohoes Savings Bank
October 29, 1998
Page 9
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No opinion is expressed as to the tax treatment of the transaction
under the provisions of any of the other sections of the Code and Income Tax
Regulations which may also be applicable thereto, or to the tax treatment of any
conditions existing at the time of, or effects resulting from, the transaction
which are not specifically covered by the opinions set forth above. No opinion
is expressed as to the tax treatment of the establishment or funding of the
Foundation.
Respectfully submitted,
SILVER, FREEDMAN & TAFF, L.L.P.
/s/ Gary A. Lax, P.C.
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