San Marcos University Corporation

“The corporation is a qualified nonprofit public organization that is generally exempt from federal and state income taxes under section 501(c)(3) of the internal revenue code and section 23701(d) of the california revenue and taxation code. This exemption is for all income taxes except for those assessed on unrelated business taxable income (ubi), if any. In order to maintain that status, the corporation is precluded from making certain expenditures, principally in support of political parties. Management believes that no such expenditures have been made. The corporation is not a private foundation. The corporation adopted accounting guidance relating to accounting for uncertainty in income taxes, which is primarily codified in fasb asc 740. The corporation files a form 990 (return of organization exempt from income tax) annually. When these returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the tax position taken or the amount of the position that would ultimately be sustained. Examples of tax positions common to the corporation include such matters as the tax-exempt status of the entity and various positions relative to potential sources of ubi. Ubi is reported on form 990-t, as appropriate. The benefit of the tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely to be realized on settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying statements of financial position, along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Upon the adoption and as of june 30, 2014 and 2013, the corporation has addressed uncertainty in its income tax position under the guidance, and there are no unrecognized/derecognized tax benefits requiring an accrual. Forms 990 and 990-t filed by the corporation are subject to examination by the internal revenue service up to three years from the extended due date of each return. Management believes forms 990 and 990-t have been filed appropriately. Forms 990 and 990-t filed by the corporation are no longer subject to examination for the fiscal years ended june 30, 2010 and prior.”

“Rental expense -2,970,014.”

“Rental expense 2,970,014.”