Contract analysis

I. Executive Summary This memorandum sets forth our analysis of whether Quorum Receivables Funding 2022-1 LLC ("QRF 2022-1" or the "Issuer") and Quorum Receivables Holding LLC ("QRH" or the "Depositor") will be subject to state-level franchise tax, income tax, or other entity-level taxes in states other than Delaware as a result of the contemplated securitization transaction. We have been asked to provide this analys

II. Background — Transaction Structure and Entity Overview A. Quorum Receivables Funding 2022-1 LLC (QRF 2022-1 — Issuer) QRF 2022-1 is a Delaware limited liability company formed on August 3, 2022, under the Delaware Limited Liability Company Act, 6 Del. C. § 18-101 et seq. The entity is registered with the Delaware Secretary of State under File No. 7894231 and has been assigned Employer Identification Number 88-124

III. Framework — State Tax Nexus Principles A. Physical Presence Standard vs. Economic Nexus Historically, the constitutional threshold for a state to impose a tax on an out-of-state entity was grounded in the physical presence doctrine. Under the Due Process Clause of the Fourteenth Amendment and the Commerce Clause of Article I, Section 8, a state could not impose a tax on an entity unless that entity had a suffici

IV. Delaware Tax Exposure A. Delaware Annual Franchise Tax Both QRF 2022-1 and QRH are organized as Delaware limited liability companies and are therefore subject to Delaware's annual franchise tax on domestic LLCs. Under 6 Del. C. § 18-1107, every domestic limited liability company is required to pay an annual tax of $300 to the State of Delaware, due on or before June 1 of each year. This is a flat-rate tax that do

V. State-by-State Nexus Analysis — Key Jurisdictions The receivables pool acquired by QRF 2022-1 comprises approximately 82,400 individual insurance premium finance loans originated by QPF to obligors located across all 50 states. The geographic distribution of the pool is diversified, but three states account for a disproportionate share of the pool balance: Because QPF originates loans across all 50 states, the obl

VI. Unitary/Combined Reporting Considerations Several states, including California, New York, Illinois, and others, require or permit combined or unitary reporting for affiliated entities that are engaged in a "unitary business." Under the unitary business principle, entities that are part of an economically integrated group may be required to file a combined or consolidated return, with the combined income of the gr

VII. Impact of Receivables Pool Characteristics on Nexus The characteristics of the receivables pool are relevant to the state tax nexus analysis in several respects. The nature, term, geographic distribution, and security of the receivables all bear on the question of whether the SPVs' ownership of the receivables creates a sufficient connection to any particular state to support a nexus finding. Pool Statistics: In

VIII. Structural Recommendations to Minimize Nexus Risk Based on the analysis set forth above, we offer the following structural and operational recommendations designed to minimize the risk that any state could assert franchise or income tax nexus over QRF 2022-1 or QRH. A. Maintain SPV Separateness Both QRF 2022-1 and QRH must strictly observe all separateness covenants contained in their respective LLC agreements

IX. Conclusion Based on the foregoing analysis, it is our conclusion that both Quorum Receivables Funding 2022-1 LLC and Quorum Receivables Holding LLC should avoid state-level franchise or income tax nexus in all states other than Delaware. In Delaware, each entity will be subject only to the $300 annual LLC franchise tax, for a combined annual cost of $600. Neither entity is expected to incur any Delaware income ta