Agenda - Council - 07/12/2022 - Laserfiche WebLink

Home

Tax-Exempt Status of the Company and the Charter School The Charter School and the Company are currently exempt from federal income tax. The Charter School is a public charter school. The Charter School and the Company are Minnesota nonprofit corporations and organizations described in Section 501(c)(3) of the Code. Under present federal law, regulations and rulings,the income and revenue of nonprofit, 501(c)(3) qualified exempt organizations are exempt from federal income tax,except for any unrelated business income as defined in the Code,and their revenues are exempt from the State sales tax except for certain services. If the Charter School fails to continue to meet the requirements necessary to preserve its status as a non-profit corporation and a tax- exempt charitable organization under Section 501(c)(3)of the Code,the interest on the Series 2022A Bonds may become taxable retroactive to the date of issuance of the Series 2022A Bonds. If the Charter School does not maintain its status,the Charter School could experience expenses which are greater than expected, which would adversely affect the Charter School's ability in the future to pay the amount due under the Leases and the Company's ability to pay the amount due under the Loan Agreement with respect to the Series 2022 Bonds. The Charter School has covenanted in the Leases, the Pledge Agreement, and other financing documents that it will not take any actions or fail to take any action, the result of which would adversely affect the Charter School's status as a nonprofit corporation and its status as a tax-exempt charitable organization under Section 501(c)(3) of the Code. IRS Compliance Program The Internal Revenue Service has an active program of conducting examinations of tax-exempt bonds through its Tax-Exempt and Government Entities Division(the"TE/GE Division"). In recent years, the number of Internal Revenue Service tax-exempt bond examinations has increased,and public statements made by individual Internal Revenue Service officials indicate that the number of Internal Revenue Service Examinations of tax-exempt bonds may continue to increase in the future. However,neither the Company nor the Charter School has sought or are expected to seek a ruling from the Internal Revenue Service with respect to the tax-exempt status of the Series 2022A Bonds. No assurance can be given that the Internal Revenue Service will not examine the Series 2022A Bonds. If the Internal Revenue Service examines the Series 2022A Bonds, such examination may have an adverse impact on the marketability and price of the Series 2022A Bonds. See"THE SERIES 2022 BONDS—Redemption of Series 2022 Bonds—Mandatory Redemption upon Determination of Taxability," and"TAX MATTERS"in this Official Statement. Tax-Exempt Status of the Series 2022A Bonds The tax-exempt status of the interest on the Series 2022A Bonds is conditioned upon the Charter School and the Company complying with the requirements of the Code and applicable Treasury Regulations as they relate to the Series 2022A Bonds and the Charter School and Company continuing to be tax-exempt organizations under Section 501(c)(3)of the Code. Failure of the Charter School or the Company to comply with the terms and conditions of the Loan Agreement,the Tax Regulatory Agreement,the Tax Certificate, the Indenture, the Leases, and other documents as described herein, or failure of the Charter School or Company to continue to be recognized as tax-exempt organizations under Section 501(c)(3) of the Code, may result in the loss of the tax-exempt status of the interest on the Series 2022A Bonds retroactive to the date of issuance of the Series 2022A Bonds. See "TAX MATTERS" in this Official Statement. Holders of Series 2022A Bonds will not receive additional interest to compensate them for federal income taxes, interest and penalties which may be assessed with respect to such interest. The Series 2022 Bonds are subject to mandatory redemption upon a Determination of Taxability with respect to the Series 2022A Bonds,at a redemption price equal to par,plus accrued interest,and with respect to the Series 2022A Bonds, a premium. There can be no assurance that,in the event of a Determination of Taxability, sufficient money would be available in such event to redeem the Series 2022 Bonds. Further,there can be no assurance that a Determination of Taxability will follow promptly after the events which give rise to the Determination of 30