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Agency legitimately disagrees, may not be practicable. Any action of the IRS, including but not limited to
<br />selection of the Series 2018A Bonds for audit, or the course or result of such audit, or an audit of bonds
<br />presenting similar tax issues may affect the market price for, or the marketability of, the Series 2018A Bonds,
<br />and may cause the Successor Agency or the Beneficial Owners to incur significant expense.
<br />Series 20I8B Bonds. Interest on the Series 2018B Bonds is not excluded from gross income for federal
<br />income tax purposes under Section 103 of the Code. Bond Counsel is of the opinion that interest on the Series
<br />2018B Bonds is exempt from State of California personal income taxes. Bond Counsel expresses no opinion
<br />regarding any other tax consequences relating to the ownership or disposition of, or the amount, accrual, or
<br />receipt of interest on, the Series 2018B Bonds. A complete copy of the proposed form of opinion of Bond
<br />Counsel is set forth in Appendix F hereto.
<br />The following discussion summarizes certain U.S. federal income tax considerations generally
<br />applicable to U.S. Holders (as defined below) of the Series 2018B Bonds that acquire their Series 2018B Bonds
<br />in the initial offering. The discussion below is based upon laws, regulations, rulings, and decisions in effect and
<br />available on the date hereof, all of which are subject to change, possibly with retroactive effect. Prospective
<br />investors should note that no rulings have been or are expected to be sought from the IRS with respect to any of
<br />the U.S. federal income tax considerations discussed below, and no assurance can be given that the IRS will not
<br />take contrary positions. Further, the following discussion does not deal with U.S. tax consequences applicable
<br />to any given investor, nor does it address the U.S. tax considerations applicable to all categories of investors,
<br />some of which may be subject to special taxing rules (regardless of whether or not such investors constitute U.S.
<br />Holders), such as certain U.S, expatriates, banks, REITs, RICs, insurance companies, tax-exempt organizations,
<br />dealers or traders in securities or currencies, partnerships, S corporations, estates and trusts, investors that hold
<br />their Series 2018B Bonds as part of a hedge, straddle or an integrated or conversion transaction, or investors
<br />whose "functional currency" is not the U.S. dollar. Furthermore, it does not address (i) alternative minimum tax
<br />consequences, (ii) the net investment income tax imposed under Section 1411 of the Code, or (iii) the indirect
<br />effects on persons who hold equity interests in a holder. This summary also does not consider the taxation of
<br />the Series 2018B Bonds under state, local or non -U.S. tax laws. In addition, this summary generally is limited
<br />to U.S. tax considerations applicable to investors that acquire their Series 2018B Bonds pursuant to this offering
<br />for the issue price that is applicable to such Series 2018B Bonds (i.e., the price at which a substantial amount of
<br />the Series 20t8B Bonds are sold to the public) and who will hold their Series 20t8B Bonds as "capital assets"
<br />within the meaning of Section 1221 of the Code. The following discussion does not address tax considerations
<br />applicable to any investors in the Series 2018B Bonds other than investors that are U.S. Holders.
<br />As used herein, "U.S. Holder" means a beneficial owner of a Series 2018B Bond that for U.S. federal
<br />income tax purposes is an individual citizen or resident of the United States, a corporation or other entity taxable
<br />as a corporation created or organized in or under the laws of the United States or any state thereof (including the
<br />District of Columbia), an estate the income of which is subject to U.S. federal income taxation regardless of its
<br />source or a trust where a court within the United States is able to exercise primary supervision over the
<br />administration of the trust and one or more United States persons (as defined in the Code) have the authority to
<br />control all substantial decisions of the trust (or a trust that has made a valid election under U.S. Treasury
<br />Regulations to be treated as a domestic trust). If a partnership holds Series 2018B Bonds, the tax treatment of
<br />such partnership or a partner in such partnership generally will depend upon the status of the partner and upon
<br />the activities of the partnership. Partnerships holding Series 2018B Bonds, and partners in such partnerships,
<br />should consult their own tax advisors regarding the tax consequences of an investment in the Series 2018B
<br />Bonds (including their status as U.S. Holders).
<br />Notwithstanding the rules described below, it should be noted that, under newly enacted law that is
<br />effective for tax years beginning after December 31, 2017 (or, in the case of original issue discount, for tax years
<br />beginning after December 31, 2018), certain taxpayers that are required to prepare certified financial statements
<br />or file financial statements with certain regulatory or governmental agencies may be required to recognize
<br />income, gain and loss with respect to the Series 2018B Bonds at the time that such income, gain or loss is
<br />recognized on such financial statements instead of under the rules described below.
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<br />SA -3-64
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