1. FEDERAL TAX ISSUES John R. McQueen, Esq. Tax-Exempt Bonds as a Financing Tool for Construction of New College and University Facilities April 18, 2008

2. MAJOR ISSUES Reimbursement Resolutions Capital Campaigns Limitations on Management Contracts Corporate-Sponsored Research Financial Covenants Tax Enforcement Auction Rate Bonds/Bond Insurer Problems

3. Reimbursement Resolutions Types of Costs Covered Timing Requirements Content of Reimbursement Resolution

4. Types of Costs Covered Preliminary Expenditures Up to 20% Not Subject Capital Expenditures Land Acquisitions and Site Preparation

5. Timing Requirements 60-day Period Prior Covered Reimbursement of Hard Costs Within 18 Months of Placed-in-Service Date Reimbursement Within 3 Years of Original Expenditure

6. Content of Reimbursement Resolution General Project Description Maximum Principal Amount of Bonds Not Applicable to Prior Financing

7. Capital Campaigns Sufficiently Direct Nexus Replacement Proceeds Concept Potential Nexus Situations

8. Capital Campaigns Donor-Restricted Gifts Capital Campaign Purposes Preliminary Earmarking Not Fatal

9. Capital Campaigns Wording of Campaign Materials Crucial Include Broad Number of Purposes Campaign for Debt Service Campaign for Operating Expenses

10. Management Contracts Types of Private Business Use Leases Corporate-Sponsored Research Management Contracts Special Legal Entitlements

11. Management Contracts Term of Agreement Type of Compensation No Net Profit-Sharing

12. Management Contracts 15-Year Safe Harbor 10-Year Safe Harbor 5-Year Safe Harbor 3-Year Per-Unit Contracts 2-Year Revenue Contracts

13. Measurement of Private Business Use 5% Limit Square Footage Approach Fair Rental Value Approach

14. Corporate-Sponsored Research Basic Research Competitive Price No Pre-Set Royalties

15. Cooperative Research Basic Research – Multiple Sponsors 501(c)(3) Controls Patent Owned by 501(c)(3) Non-Exclusive Royalty-Free License Federal Rights under Bayh-Dole Act

16. Financial Covenants Potential Arbitrage Issues Liquidity Covenants

17. Liquidity Covenant Safe Harbor Semi-Annual Testing Amount Reasonable Needs Provide Senior Lien

18. Tax Enforcement Phase I – 501(c)(3) Audit Program Issues Compliance Check Questionnaire New IRS Form 990, Schedule K

19. Auction Rate Bonds/Variable Rate Demand Bonds Conversion from Auction Rate = No Reissuance Purchases by LOC Bank or Conduit Borrower Do Not Retire Debt Purchases by Conduit Borrower Do Not Violate Program Investment Rules