5.2a ERMUSR 04-13-2021 - Laserfiche WebLink

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OTHER FEDERAL AND STATE TAX CONSIDERATIONS Propertyand Casualty Insurance Companies Property and casualty insurance companies are required to reduce the amount of their loss reserve deduction by the applicable percentage of the amount of tax-exempt interest received or accrued during the taxable year on certain obligations, including interest on the Series 2021B Bonds. Foreign Insurance Companies Foreign companies carrying on an insurance business in the United States are subject to a tax on income which is effectively connected with their conduct of any trade or business in the United States, including “net investment income.” Net investment income includes tax-exempt interest such as interest on the Series 2021B Bonds. Branch Profits Tax A foreign corporation is subject to a branch profits tax imposed by Section 884 of the Code. A branch's earnings and profits may include tax-exempt municipal bond interest, such as interest on the Series 2021B Bonds. Passive Investment Income of S Corporations Passive investment income, including interest on the Series 2021B Bonds, may be subject to federal income taxation under Section 1375 of the Code for an S corporation that has Subchapter C earnings and profits at the close of the taxable year if more than a certain percentage of the gross receipts of such Scorporation is passive investment income. General The preceding is not a comprehensive list of all federal or State tax consequences which may arise from the receipt or accrual of interest on the Series 2021B Bonds. The receipt or accrual of interest on the Series 2021B Bonds may otherwise affect the federal income tax (or Minnesota income tax orfranchise tax) liability of the recipient based on the particular taxes to which the recipient is subject and the particular tax status of other items of income or deductions. All prospective purchasers of the Series 2021B Bonds are advised to consult their own tax advisors as to the tax consequences of, or tax considerations for, purchasing or holding the Series 2021B Bonds. NOTBANK-QUALIFIED TAX-EXEMPT OBLIGATIONS The Series 2021B Bonds will not be designated as “qualified tax-exempt obligations” for purposes of Section265(b)(3) of the Code, relating to the ability of financial institutions to deduct from income for federal income tax purposes, interest expense that is allocable to carrying and acquiring tax-exempt obligations. Financial institutions are not generally entitled to a deduction for interest expenses allocable to the owners of tax-exempt obligations purchased after August 7, 1986. - 25 - 290