82-25 AUTHORIZING, APPROVING, RATIFYING AND CONFIRMING CERTAIN ADDITIONS AND CHANGES TO ECONOMIC DEVELOPMENT REVENUE BONDS (BRETTWOOD VILLAGE ASSOCIATES PROJECT)

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TAX EXEMPTION Generally, interest on obligations of a state or a political subdivision of a state is exempt from Federal income taxation. Section 103(b) of the Internal Revenue Code of 1954, as amended (the "Code") , provides, however, that interest on any such obligation which is an "industrial development bond" shall not be exempt. Exceptions to this provision are created by (i) Section 103(b)(6) (A) of the Code for issues of industrial development bonds if the aggregate authorized face amount of the issue (including the outstanding principal amount of certain prior exempt issues) is not greater than $1,000,000 and (ii) Section 103(b) (6)(D) of the Code for issues of industrial development bonds if the aggregate authorized face amount of the issue (including the out- standing principal amount of certain prior exempt issues and certain capital expenditures) is not greater than $10,000,000. The interest on any industrial development bond which meets the requirements of Section 103(b)(6)(A) or Section 103(B)(6)(D) of the Code is exempt from Federal income taxation unless the holder of such bond is a "substantial user" of the facilities as provided in Section 103(b) (10) of the Code or a "related person" as defined in Section 103(b) (6)(D) of the Code. In the opinion of Chapman and Cutler, Chicago, Illinois, Bond Counsel, based on existing statutes, court decisions, current rulings and offical interpretations of law, interest on the Bonds will be excludable from the gross income of the recipients thereof for Federal income tax purposes, except for the interest on any Bond held by a "substantial user" of the Project or a "related person". In arriving at such conclusion, Bond Counsel will rely on a certificate of the City electing to have the provisions of Section 103(b)(6)(D) of the Code apply to the Bonds, a certificate ofthe Partnership as to (i) the amount of capital expenditures with respect to certain facilities paid or incurred in the three years preceding the date of issuance of the Bonds, and (ii) the outstanding principal amount of any prior exempt issues required to be taken into account, and evidence of the filing of each certificate pursuant to Section 103(b) (6) (D) of the Code. Interest on the Bonds may become taxable if certain additional capital expenditures are paid or incurred within the governmental unit in which the Project is located (or outside such governmental unit if paid or incurred with respect to certain facilities contiguous to or integrated with property located in such governmental unit) within the three yesrs subsequent to the date of issuance of the Bonds which when added to the sum of (a) the principal amount of the Bonds and (b) the amounts referred to in clause (i) and (ii) above exceed $10,000,000. The Partnership covenants in the Loan Agreement that such $10,000,000 limit will not be exceeded and that it will not take any action or permit any action to be taken which will cause the interest on the Bonds to become subject to federal income taxation pursuant to the provisions of Section 103(b) of the Code; provided, that the Partner- ship shall not have violated such covenants if the interest on any of the Bonds becomes taxable to a person who is a "substantial user" of the Project or a "related person" within the meaning of Section 103(b)(10) of the Code. H. R. 4420, introduced in the United States House of Representatives on September 9, 1981, by Representative Charles Rangel, Chairman of the Oversight Subcomm�ittee of the Committee on Ways and Means, would, if it becomes law in the form in which it was introduced, impose certain additional requirements and restrictions on exempt small issues of industrial development bonds under 37