Orchestra Iowa Inc.

PART X, LINE 2:

“The association is exempt from income tax under section 501(c)(3) of the internal revenue code and a similar section of the iowa income tax law, which provides tax exemption for corporations organized and operated exclusively for religious, charitable, or educational purposes. School and opus account for income taxes in accordance with fasb codification topic 740-10-05, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. There are no deferred income tax assets or liabilities at june 30, 2014. Income tax expense was $7,230 and $7,408 for the years ended june 30, 2014 and 2013, respectively. Manager, landlord, and master tenant were formed as a limited liability companies, and as such, are not taxed under federal and state income tax laws. Instead, the members are liable for their federal and state income taxes on their proportionate shares of the manager, landlord, and master tenant's taxable income. Management has determined that the association does not have any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures. Since tax matters are subject to some degree of uncertainty, there can be no assurance that the association's tax returns will not be challenged by the taxing authorities and that the association will not be subject to additional tax, penalties, and interest as a result of such challenge. The association's policy is to include interest and penalties related to income taxes, if any, in interest expense and operating expenses, respectively. The association's advertising revenue is considered unrelated business income and is subject to both federal and state corporate income taxes. The association files income tax returns in the u.s. Federal jurisdiction and the state of iowa. Income tax returns filed for tax years 2010 to present are open to examination in the federal and state jurisdictions for the association. Manager, landlord, master tenant, school, and opus are open to examination for tax years 2011 to present. The association does not anticipate that any potential federal or state audit of open tax years will result in material change to its financial position.”