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36 TAX MATTERS Tax Exemption It is the opinion of Taft Stettinius & Hollister LLP, Minneapolis, Minnesota, as Bond Counsel to the Issuer, under existing laws, regulations, rulings, and decisions, and assuming continuing compliance by the Borrower with covenants made to satisfy requirements of the Internal Revenue Code of 1986, as amended (the “Code”), interest on the Series 2020 Bonds is not included in gross income for federal income tax purposes and, to the same extent, is not included in taxable net income of individuals, estates, and trusts for Minnesota income tax purposes. Interest on the Series 2020 Bonds is not an item of tax preference for purposes of the computation of the federal alternative minimum tax for individuals or for purposes of the State alternative minimum tax imposed on individuals, estates, and trusts. Interest on the Series 2020 Bonds is subject to the Minnesota franchise tax imposed on corporation, including financial institutions. In expressing its opinion, Bond Counsel will rely on an opinion of General Counsel of Presbyterian Homes and Services, as counsel to the Borrower and the Limited Guarantor, as to those matters with respect to which its opinion is rendered. The Code establishes certain requirements (the “Federal Tax Requirements”) that must be satisfied subsequent to the issuance of the Series 2020 Bonds in order that, for federal income tax purposes, interest on the Series 2020 Bonds will continue to be excluded from gross income for federal income tax purposes. The Federal Tax Requirements include, but are not limited to, requirements relating to the expenditure of proceeds of the Series 2020 Bonds, requirements relating to the operation of the facilities financed by the Series 2020 Bonds, restrictions on the investment of proceeds of the Series 2020 Bonds prior to expenditure, and the requirement that certain earnings on the “gross proceeds” of the Series 2020 Bonds be paid to the federal government. Noncompliance with the Federal Tax Requirements may cause interest on the Series 2020 Bonds to become subject to federal and Minnesota income taxation retroactive to their date of issue irrespective of the date on which such noncompliance occurs or is ascertained. In expressing its opinion, Bond Counsel will assume compliance by the Issuer, the Borrower, and the Trustee with the tax covenants contained in the Loan Agreement and other documents for the issuance of the Series 2020 Bonds. No provision has been made for an increase in the interest rate on the Series 2020 Bonds in the event that interest on the Series 2020 Bonds becomes subject to federal or Minnesota income taxation; however, upon the occurrence of a Determination of Taxability with respect to the Series 2020 Bonds, the Series 2020 Bonds are subject to mandatory redemption, at a price of 103% of the outstanding principal amount thereof plus accrued interest. See “THE SERIES 2020 BONDS – Redemption or Prepayment – Mandatory Redemption Upon Determination of Taxability” in this Official Statement. Bond Premium The Series 2020 Bonds with a stated maturity of [May] 1, 20___ (the “Premium Bond”), is being sold at a price greater than the principal amounts payable on such Series 2020 Bonds at maturity. To the extent that a purchaser of a Premium Bond acquires a Premium Bond at a price greater than the principal amount payable at maturity, such excess maybe considered “amortizable bond premium” under Section 171 of the Code. In general, any amortizable bond premium with respect to a Premium Bond must be amortized under the Code. The amount of premium so amortized will reduce the owner’s basis in such Premium Bond for federal income tax purposes, and such amortized premium is not deductible for federal income tax purposes. In the case of a tax-exempt debt instrument subject to early call, the bond premium rules include special rules that impact the period over which the premium is amortized. The rate of the