Cleveland Clinic Health System Obligated Group - FMSbonds.com

• Proposals to eliminate the tax-exempt status of interest on bonds issued to finance healthfacilities, or to limit the use of such tax-exempt bonds, have been made in the past, andmay be made again in the future. The adoption of such proposals would increase the costto the Obligated Issuers of financing future capital needs.• Increased unemployment or other adverse economic conditions which could increase theproportion of patients who are unable to pay fully for the cost of their care. In addition,increased unemployment caused by a general downturn in the economy of the ObligatedIssuers’ service areas or by the closing of operations of one or more major employers insuch service areas may result in a significant change in the demographics of such serviceareas, such as a reduction in the population.In the future, other events may adversely affect the operations of the Obligated Issuers, as well as otherhealth care facilities, in a manner and to an extent that cannot be determined at this time.TAX MATTERSIn the opinion of Squire, Sanders & Dempsey L.L.P., Bond Counsel, under existing law: (i) interest on theSeries 2008A Bonds is excluded from gross income for federal income tax purposes under Section 103 of theInternal Revenue Code of 1986, as amended (the “Code”), and is not an item of tax preference for purposes of thefederal alternative minimum tax imposed on individuals and corporations; and (ii) interest on, and any profit madeon the sale, exchange or other disposition of, the Series 2008A Bonds are exempt from the Ohio personal incometax, the Ohio commercial activity tax, the net income base of the Ohio corporate franchise tax, and municipal,school district and joint economic development district income taxes in Ohio. Bond Counsel expresses no opinionas to any other tax consequences regarding the Series 2008A Bonds.The opinion on tax matters will be based on and will assume the accuracy of certain representations andcertifications, and continuing compliance with certain covenants, of the Commission and the Obligated Groupcontained in the transcript of proceedings and that are intended to evidence and assure the foregoing, including thatthe Series 2008A Bonds are and will remain obligations the interest on which is excluded from gross income forfederal income tax purposes. In addition, Bond Counsel has relied on, among other things, the opinion of DavidRowan, Chief Legal Officer of the Cleveland Clinic, regarding the current status of each member of the ObligatedGroup as an organization described in Section 501(c)(3) of the Code, which opinion is subject to a number ofqualifications and limitations. Bond Counsel also has relied upon representations of the members of the ObligatedGroup concerning the Obligated Group’s “unrelated trade or business” activities as defined in Section 513(a) of theCode. Neither Bond Counsel nor the Chief Legal Officer has given any opinion or assurance concerning Section513(a) of the Code or the effect of any future activities of the Commission or the Obligated Group. Failure of themembers of the Obligated Group to maintain their status as organizations described in Section 501(c)(3) of theCode, or to operate the facilities financed by the Series 2008A Bonds in a manner that is substantially related to theObligated Group’s charitable purpose under Section 513(a) of the Code, may cause interest on the Series 2008ABonds to be included in gross income retroactively to the date of the issuance of the Series 2008A Bonds. BondCounsel will not independently verify the accuracy of the Commission’s and the Obligated Group’s certificationsand representations or the continuing compliance with the Commission’s and the Obligated Group’s covenants andwill not independently verify the accuracy of the opinion of the Obligated Group’s counsel.The opinion of Bond Counsel is based on current legal authority and covers certain matters not directlyaddressed by such authority. It represents Bond Counsel’s legal judgment as to exclusion of interest on the Series2008A Bonds from gross income for federal income tax purposes but is not a guaranty of that conclusion. Theopinion is not binding on the Internal Revenue Service (“IRS”) or any court. Bond Counsel expresses no opinionabout (i) the effect of future changes in the Code and the applicable regulations under the Code or (ii) theinterpretation and the enforcement of the Code or those regulations by the IRS.The Code prescribes a number of qualifications and conditions for the interest on state and localgovernment obligations to be and to remain excluded from gross income for federal income tax purposes, some ofwhich require future or continued compliance after issuance of the obligations. Noncompliance with theserequirements by the Commission or the Obligated Group may cause loss of such status and result in the interest on55