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1! Corporate Alternative Minimum Taxes; Environmental Tax; Brands Profits Tax Interest on the Series 1991 Bonds may be includable in a corporation's 'adjusted net book income upon which alternative minimum taxable income is calculated and such interest may also be included in corporate alternative minimum taxable income that is abject to the environmental tax imposed under Section 59A of the Internal Revenue Code of 1986, as amended (the 'Code"). In addition, such interest may be includable in the amount upon which certain foreign corporations are required to pay the branch profits tax imposed under Section 884 of the Code. Prospective corporate purchasers of the Series 1991 Bonds should consult their profesaiooal tax advisors concerning the potential impact of receipt of interest income on such bonds upon their Federal tax liability. Financial Institutions' Cab of Carrying Tau -Exempt Bonds Under the Code, financial institutions are denied 100 percent of the interest expense deduction that is allocable, by formula, to the carrying of tax-exempt obligations acquired after August 7, 1986; the former provision of the Internal Revenue Code of 1954, which provided for a 20 percent disallowance of the interest expense deduction, continues to apply with respect to tax-exempt obligations acquired on or before August 7, 1986, as well as to new issues specifically designated as "qualified tax-exempt obligations under Section 265 of the Code. The Series 1991 Bonds have nor been designated by the County as 'qualified tax-exempt obligations" for purposes of Section 265 of the Code. Original Isaue Discount In the opinion of Bond Counsel, under existing law, the original isms discount in the selling price of each Series 1991 Bond maturing in the years May 1, and May 1, , to the extent properly allocable to each holder of such Series 1991 Bond, will be excluded from gross income for federal income tax purposes with respect to such holder. The original issue discount is the excess of the stated redemption price at maturity of such Series 1991 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. Under section 1288 of the Code, original issue discount on tax-exempt bonds accrues on a compound basis. The amount of original issue discount that accrues to a holder of a Series 1991 Bond who acquires the Series 1991 Bond in this offering during any accrual period generally equals (i) the issue price of such Series 1991 Bond plus the amount of original issue discount accrued in all prior accrual periods, multiplied by (u) the yield to maturity of such Series 1991 Bond (determined on the basis of compounding at the close of each accrual period and properly adjusted for the length of the accrual period), Tess (iii) any interest payable on such Series 1991 Bond during such accrual period. The amount of original issue discount so accrued in a particular accrual period will be considered to be received ratably on each day of the accrual period, will be excluded from gross income for federal income tax purposes, and will increase the holder's tax basis in such Series 1991 Bond. Any gain realized by a holder from a sale, exchange, payment or redemption of a Series 1991 Bond would be treated as gain from the sale or exchange of such Series 1991 Bond. Other Federal Income Tax Consequences Ownership of the Series 1991 Bonds may also result in other Federal income tax consequences to certain taxpayers, including, but not limited to, financial institutions, property and casualty insurance companies, certain subchapter S corporations with substantial passive income and subchapter C earnings and profits, individual recipients of Social Security or Railroad Retirement benefits and taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry the bonds. No opinion or representation concerning these matters is being given or made by the County, Bond Counsel or any other party associated with issuance, offering or sale of the Series 1991 Bonds. Prospective purchasers of the Series 1991 Bonds should consult their own tax advisors concerning these matters. LITIGATION In the opinion of the County Attorney, no legal proceedings are pending or threatened that materially affect the County's ability to perform its obligations to the holders of the Series 1991 Bonds or that materially affect the financial condition of the System. OA 11