Rush Health Systems Inc.

PART X, LINE 2:

“Rush health systems, inc. And the affiliates are not-for-profit corporations as described in section 501(c)(3) of the internal revenue code and are exempt from federal income taxes on their income under section 501(a) of the internal revenue code. The subsidiaries, however, are taxable corporations and file corporate income tax returns. The health system follows the guidance for accounting for uncertainty in income taxes recognized in the health system's consolidated financial statements that prescribes a recognition threshold of more-likely-than-not to be sustained upon examination by the appropriate taxing authority. Measurement of the tax uncertainty occurs if the recognition threshold has been met. The guidance also addresses derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. Management has determined that this guidance had no material effect on the consolidated financial statements. The health system's policy is to recognize interest related to unrecognized tax benefits in interest expense and penalties in general and administrative expenses. There were no interest or penalties recognized on the consolidated statements of operations and changes in net assets as a result of this guidance. Generally, tax returns for years ended december 31, 2011, and thereafter remain subject to examination by federal and state tax authorities. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. The subsidiaries' temporary differences relate primarily to property and equipment and net operating loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.”