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

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subject to federal income taxation under Section 1375 of the Code for S corporations that have Subchapter C earnings and profits at the close of the taxable year if more than 25 percent of the gross receipts of such S corporations is passive investment income and may be subject the Subchapter S corporation to termination of its Subchapter S status under Section 1362(d) of the termination of its Subchapter S status under Section 1362(d) of the Code. Financial Institutions The Code limits the ability of financial institutions to deduct any portion of the interest expense allocable to the ownership of certain tax-exempt obligations acquired after August 7, 1986. The Series 2013 Bonds have not been designated by the Issuer as "qualified tax-exempt obligations" under Section 265(b)(3) of the Code. Property and Casualty Insurance Companies Linder the Code, property and casualty insurance companies arc required, for taxable years beginning after 31, 1986, to reduce the amount of their loss reserve deduction by 15 percent of the amount of tax-exempt interest received or accrued during the taxable year on certain obligations acquired after August 7, 1986, including interest on the Bonds. The Series 2013B Bonds Interest to be paid on the Series 2013B Bonds is included in gross income of the recipient for federal income tax purposes and in taxable net income of individuals, estates and trust for Minnesota income tax purposes, and is subject to Minnesota franchise taxes imposed on corporations and financial institutions. Original Issue Discount/Premium Certain of the Bonds may be sold with original issue discount ("OID Bonds.") For each maturity of OID Bonds, original issue discount is the excess of the stated redemption price at maturity of such Bonds over the initial offering price to the public, excluding underwriters and other intermediaries, at which price a substantial amount of such Bonds were sold. The appropriate portion of such original issue discount allocable to the original and each subsequent holder will be treated as interest and original issue discount allocable to the original and each subsequent holder will be treated as interest and excluded from gross income for federal income tax purposes and will increase a holder's tax basis in such Series 2013A Bonds for purposes of determining gain or loss upon sale, exchange, redemption, or payment at maturity. Owners of such Series 2013A Bonds should consult their own tax advisors with respect to the computation and determination of the portion of original issue discount which will be treated as interest and added to a bolder's tax basis during the period such Series 2013A Bonds are held. Bonds purchased, whether at original issuance or otherwise, for an amount higher than their principal amount payable at maturity (or, in some cases, at their earlier call date) ("Premium Bonds") will be treated as having amortizable bond premium. No deduction is allowable for the amortizable bond premium in the case of a Premium Bond the interest on which is excluded from gross income for federal income tax purposes. However, the amount of tax-exempt interest received, and a beneficial owner's basis in a Premium Bond, will be reduced by the amount of amortizable bond premium properly allocable to such Beneficial Owner. 34