Agenda - Council - 08/13/2013 - Laserfiche WebLink

Home

years under current State law (or otherwise as may be required by State law in the future), certification or accreditation or of any future changes in such laws, regulations and standards. Maintenance of Tax-Exemnt Status. The federal tax-exempt status of the Series 2013A Bonds presently depends upon the maintenance by the Company and the School of their status as organizations described in Section 501(c)(3) of the Code. The maintenance of such status is contingent on compliance with general rules promulgated in the Code and related regulations regarding the organization and operation of tax-exempt entities, including its operation for charitable and educational purposes and its avoidance of transactions which may cause its assets to inure to the benefit of private individuals. The Internal Revenue Service (the "IRS") has reorganized activities relating to tax- exempt bonds with the stated aim of increasing the level of audit coverage. Historically, for an issue of tax-exempt bonds, such as the Series 2013A Bonds, the only penalty available to the IRS in the event of a failure to fully comply with Section 501(c)(3) of the Code is the revocation of tax-exempt status. Recent legislation was enacted which imposes an excise tax as an intermediate sanction against tax-exempt organizations which engage in "excess benefit transactions". Excess benefit transactions generally are transactions in which an improper economic benefit is conferred upon certain persons. It is expected that this recent legislation will make it Icss likely that the IRS will revoke the 501(c)(3) tax-exempt status of nonprofit corporations. The loss of tax-exempt status by the School could result in loss of tax exemption with respect to the Series 2013A Bonds and defaults in covenants with respect to the Series 2013A Bonds would likely be triggered. Such an event would have material adverse consequences on the financial condition of the Company and the School. lntcrest on the Series 2013B Bonds is not excludable from gross income and is subject to both federal and Minnesota state income taxation. Certain Other Risks. The following factors, among others, may also adversely affect the operation of educational facilities, including the educational facilities of the School, to an extent that cannot be determined at this time: (1) future legislation and regulations affecting public (charter) schools and the educational industry in general; (2) cost and availability ofinsurance in the State; (3) increased costs of attracting and retaining or decreased availability of a sufficient number of teachers; (4) increased costs resulting from unionization of the employees of the facilities of the School or the utilization by non -union employees of the facilities of the School as may be available under the National Labor Relations Act; (5) the facilities owned by the Company are composed of special-purpose facilities which are not suitable for industrial or commercial use; consequently, it could be difficult to find a buyer or lessee for such facilities if it were necessary for the Company to raise funds by selling or leasing any of its assets in order to repay its indebtedness: and 34