Borrower's Obligation. with Respect to Exclusion of Interest Paid on the Bonds. Except to the extent caused by the actions or omissions of Issuer, the Borrower will not take any action, omit to take any action or permit the taking or omission of any action within its control (including, without limitation, making or permitting any use of the proceeds of the Bonds) if taking or omitting to take such action would cause the interest on the Bonds to be included in the gross income of the recipients thereof (other than the income of a "substantial user" of the Project or a "related person" with the meaning of section 147(a) of the Code) for federal income tax purposes. Toward that end, the Borrower covenants that it will comply with all provisions of the Tax Certificate. This provision shall control in case of conflict or ambiguity with any other provision of this Agreement. In furtherance thereof, the Borrower covenants as follows: (a) that the Borrower will not cause the Bonds to be treated as "federally guaranteed" obligations for purposes of section 149 of the Code, as may be modified in any applicable rules, rulings, policies, procedures, regulations or other official statements promulgated or proposed by the Department of the Treasury or the Internal Revenue Service with respect to the "federally guaranteed" obligations described in section 149 of the Code. For purposes of this paragraph, the Bonds shall be treated as "federally guaranteed" if (i) all or any portion of the principal or interest is or will be guaranteed directly or indirectly by the United States of America or any agency or instrumentality thereof, or (ii) a significant portion of the proceeds of the Bonds will be (A) used in making loans the payment of principal or interest with respect to which is to be guaranteed in whole or in part by the United States of America or any agency or instrumentality thereof, or (B) invested directly or indirectly in federally insured deposits or accounts, and (iii) such guarantee is not described in section 149(b) of the Code; (b) that the costs of issuing the Bonds which are financed with proceeds of the Bonds, if any, will not exceed an amount equal to 2 percent of the proceeds received from the sale of the Bonds; and (c) that the Project will not be operated for a prohibited use under Section 147(e) of the Code and Section 144(c)(6)(B) (including no residential rental property) of the Code, that equipment or fixtures that are a part of the Project will not be moved out of the recovery zone that encompasses the Project. The Borrower acknowledges that in the event of an examination by the Internal Revenue Service of the exemption from Federal income taxation for interest paid on the Bonds, the Issuer is likely to be treated as the "taxpayer" in such examination and agrees that it will respond, and direct the Issuer to respond, in a commercially reasonable manner to any inquiries from the Internal Revenue Service in connection with such an examination. The Issuer covenants that it will cooperate with the Borrower, at the Borrower's expense and at its direction, in connection with such examination.
Appears in 2 contracts