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EXHIBIT 8.1
Conseco Finance Corp.
1100 Landmark Towers
345 St. Peter Street
St. Paul, MN 55102
Re: Conseco Finance Lease 2000-1, LLC
Federal Income Tax Characterization
Ladies and Gentlemen:
We have acted as counsel for Conseco Finance Corp., a Delaware corporation
("Conseco Finance"), Conseco Finance Vendor Services Corporation, a Delaware
corporation and a subsidiary of Conseco Finance ("Vendor Services"), Green Tree
Lease Finance II, Inc., a Minnesota corporation and a subsidiary of Vendor
Services (the "SPC"), and Conseco Finance Lease 2000-1, LLC, a Delaware limited
liability company of which the SPC is the sole member (the "Issuer"), in
connection with the issuance of Lease-Backed Notes (the "Notes") pursuant to an
Indenture, dated as of July 1, 2000 (the "Indenture"), among the Issuer and
Wells Fargo Bank Minnesota, N.A. (the "Trustee"), as Trustee.
Pursuant to a Transfer Agreement dated as of July 1, 2000 (the "Transfer
Agreement"), among the SPC, as Purchaser, and Vendor Services, as Seller and
Servicer, Vendor Services has sold certain leases, including all collections
received with respect to the leases and certain other related rights (the
"Leases") and its interests (which may be deemed an ownership interest or a
security interest, depending on the terms of the related Lease) in the equipment
related to such Leases (such interests being hereinafter referred to as the
"Equipment") to the SPC. The Leases will be transferred by the SPC to the Issuer
pursuant to the terms of a Contribution and Servicing Agreement dated as of July
1, 2000 (the "Contribution and Servicing Agreement"), among the Issuer, the SPC,
Vendor Services, in its individual capacity and as Servicer, and the Trustee.
Pursuant to the Contribution and Servicing Agreement, the SPC will also grant to
the Issuer certain rights to the proceeds of the Equipment (the "Residual
Realizations"). The Leases, the Equipment and the Residual Realizations are
collectively referred to as the "Trust Assets."
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Conseco Finance Corp.
July __, 2000
Page 2
You have requested our opinion with respect to the federal income tax
characterization of the Notes and the Issuer. For purposes of rendering our
opinion we have examined the preliminary Prospectus dated July __, 2000,
relating to the Notes (the "Prospectus"), the Transfer Agreement, the
Contribution and Servicing Agreement, the Indenture and the related documents
and agreements contemplated therein (collectively, the "Transaction Documents")
and we have reviewed such questions of law as we have considered necessary and
appropriate. All capitalized terms used herein and not defined herein have the
meanings set forth in the Indenture or the Contribution and Servicing Agreement.
Our opinion is based upon the existing provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), currently applicable Treasury Department
regulations issued thereunder, current published administrative positions of the
Internal Revenue Service (the "Service") contained in revenue rulings and
revenue procedures, and judicial decisions, all of which are subject to change,
either prospectively or retroactively, and to possibly differing
interpretations. Any change in such authorities may affect the opinions rendered
herein.
Our opinion is also based on the projections, representations, warranties,
covenants and agreements set forth in the Transaction Documents and the
assumption that Vendor Services, the SPC, the Issuer, the Indenture Trustee and
the Noteholders will at all times comply with the requirements of the
Transaction Documents. We have also relied in part on various factual
representations made to us by the Conseco Finance and Vendor Services. Although
we have not undertaken an independent investigation of any factual matters,
nothing contrary to any of these representations has come to our attention in
the course of our consideration of these matters. Any alteration of such factual
representations may adversely affect our opinion.
An opinion of counsel is predicated on all the facts and conditions set
forth in the opinion and is based upon counsel's analysis of the statutes,
regulatory interpretations and case law in effect as of the date of the opinion.
It should not be accepted as a guarantee that a court of law or an
administrative agency will concur in the opinion.
Federal Income Tax Characterization of the Notes
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In general, for federal income tax purposes, the characterization of the
issuance and sale of notes as the issuance and sale of debt, the issuance and
sale of an equity or beneficial interest in the issuer or the sale of an
ownership interest in property of the issuer is a question of fact, the
resolution of which is based upon a variety of factors, principal among which is
a determination of who will receive the benefits of, and bear the burdens
relating to, the property. Thus, the determination of whether an instrument
issued in connection with such a transaction will be treated as debt for federal
income tax purposes, or instead will be treated as an equity or beneficial
interest in the issuer or as an ownership interest in the assets of the issuer,
depends on all the facts and circumstances in each case. See generally, Plumb,
The Federal Income Tax Significance of Corporate Debt: A Critical Analysis and a
Proposal, 26 Tax L. Rev. 369 (1971).
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Conseco Finance Corp.
July __, 2000
Page 3
In any such determination, several factors must be considered, and debt
characterization may be indicated by, among other things, the independence of
the debt holders and equity holders, the intention of the parties to create a
debt, the issuance of a formal debt instrument, the provision of a fixed
maturity date, the likelihood and expectation that the principal amount will be
repaid, the debt to equity ratio of the issuer, the nature of the assets serving
as security for the obligation and various other factors. In the context of
this transaction, the most important considerations are: (i) whether the
Noteholders bear the burdens of ownership (i.e., the risk of loss from the Trust
Assets) and (ii) whether the Noteholders have acquired the benefits of ownership
(i.e., the potential for gain from the Trust Assets). In view of all of the
relevant facts and circumstances, the likelihood of the Noteholders bearing any
actual loss in respect of the Trust Assets is considered to be remote.
Accordingly, the Noteholders should not be regarded as bearing a significant
risk of loss associated with ownership of the Trust Assets. In addition, because
the Noteholders are entitled to receive a fixed principal amount and a fixed
rate of interest, the economic return to the Noteholders will not be affected by
any change in the value of the Trust Assets. Accordingly, the Noteholders will
not receive any benefit from any increase in the value of the Trust Assets.
A number of other factors are consistent with the treatment of the Notes as
debt. The most important of these factors are as follows: the form of the Notes
as debt, the sequential payment feature of the Notes, the Servicer's ability to
permit prepayments on the Leases, the ultimate retention of reinvestment risk by
the SPC, the fact that delinquencies on the Leases and the negative carry
resulting therefrom are not borne by the Noteholders, the existence of a
redemption option in favor of the SPC, the rights of Noteholders in the proceeds
of any liquidation of Equipment upon a default under the related Lease, the
rights of Noteholders in Residual Realizations and the initial deposit and
subsequent deposits to be made to the Reserve Account.
Based upon the foregoing, we are of the opinion that the Notes will be
treated as debt for federal income tax purposes.
Federal Income Tax Characterization of the Issuer
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The Issuer is similar in many respects to trusts established to hold
collateral pledged as security in connection with lending transactions. If all
classes of Notes and other interests issued by the Issuer were debt for federal
income tax purposes, the Issuer would be disregarded for federal income tax
purposes and would be characterized as a mere security arrangement. Treas.
Reg.ss.1.61- 13(b); Rev. Rul. 76-265, 1976-2 C.B. 448; see also Rev. Rul.
73-100, 1973-1 C.B. 613 (domestic corporations's transfer of securities
to Canadian security holder, to secure liabilities to policyholders in Canada,
does not create a trust where discretionary powers retained by corporation);
Rev. Rul. 71- 119, 1971 C.B. 163 (settlement fund administered by "trustee" not
a trust).
The Issuer, however, has issued a membership interest to the SPC and the
membership interest (i) will not take the form of debt, (ii) is intended not to
be treated as debt for federal income tax purposes, and (iii) is intended to be
treated instead as evidencing the ownership interest of the SPC in property
transferred by the SPC to the Issuer, subject to the security interests of the
Noteholders. As long as, for federal income tax purposes, the
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Conseco Finance Corp.
July __, 2000
Page 4
Notes are treated as debt and the SPC is viewed to hold all interests in the
Issuer other than the Notes, the Issuer should be treated as a mere security
arrangement and disregarded for federal income tax purposes.
If the Issuer is recognized as an entity for federal tax purposes, the
Issuer will be viewed as a business entity whose federal tax characterization
will be determined under Treasury Regulations ss.ss. 301.7701-2 and 301.7701-3.
Treasury Regulations ss. 301.7701-2 provides that "a business entity is any
entity recognized for federal tax purposes . . . that is not properly classified
as a trust under ss. 301.7701-4 or otherwise subject to special treatment under
the Internal Revenue Code."
Treasury Regulations ss. 301.7701-2 also provides that certain types of
entities are treated as corporations for federal tax purposes, including
entities formed under a state statute which refers to the entity as
"incorporated or as a corporation, body corporate or body politic," or as a
"joint-stock company or joint-stock association". The definition of corporation
also includes insurance companies, certain banking entities, foreign entities
and other entities specified in ss. 301.7701-2. The Issuer is not an entity
which is treated as a corporation under ss. 301.7701-2.
Treasury Regulations ss. 301.7701-3 refers to a business entity that is not
classified as a corporation as an "eligible entity." That section provides that
an eligible entity with a single owner can elect to be classified as an
association (which is taxed as a corporation) or to be disregarded as an entity
separate from its owner. An eligible entity with at least two members can elect
to be classified as either an association or a partnership. Treasury Regulations
ss. 301.7701-3 further provides certain default rules pursuant to which, unless
the entity affirmatively elects to be classified as an association, an eligible
entity is disregarded as an entity separate from its owner if it has a single
owner, and is treated as a partnership if it has two or more members.
If the Issuer is recognized as an entity for federal tax purposes and all
classes of Notes are treated as debt for federal tax purposes, then the Issuer
would be an eligible entity with a single owner, the SPC. Under the default
rules of Treasury Regulations ss. 301.7701-3 described above, the Issuer would
be disregarded as an entity separate from the SPC for federal tax purposes.
If any interest in the Issuer other than the membership interest of the SPC
were treated as an equity interest in the Issuer, the Issuer would be an
eligible entity with two or more members. In such a case, under the default
rules of Treasury Regulations ss. 301.7701-3 described above, the Issuer would
be treated as a partnership for federal tax purposes.
Under Section 10.10 of the Contribution and Servicing Agreement, all of the
parties to such Agreement have agreed not to file an election to treat the
Issuer as an association taxable as a corporation.
Based on the foregoing, it is our opinion that the Issuer will not be
treated as an association taxable as a corporation for federal income tax
purposes.
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Conseco Finance Corp.
July __, 2000
Page 5
Publicly Traded Partnership
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Section 7704 of the Code provides that, subject to certain exceptions, a
partnership the interests in which are (i) traded on an established securities
market or (ii) readily tradable on a secondary market (or the substantial
equivalent thereof) will be treated as a corporation for federal income tax
purposes.
Treasury Regulations Section 1.7704-1, issued on November 29, 1995 (the
"PTP Regulations"), provide further explanation of the rules governing publicly
traded partnerships. The PTP Regulations provide that an "established securities
market" includes a national, foreign, regional or local exchange, as well as an
interdealer quotation system which regularly disseminates firm buy or sell
quotations by identified brokers or dealers, by electronic means or otherwise.
The PTP Regulations also provide that interests in a partnership are readily
tradable on a secondary market or the substantial equivalent thereof if the
partners are readily able to buy, sell or exchange their partnership interests
in a manner that is economically comparable to trading on an established
securities market.
Interests in the Issuer or in the Trust Assets which might be viewed to
constitute interests in a partnership will not be traded on an established
securities market within the meaning of the PTP Regulations. The PTP Regulations
provide a safe harbor pursuant to which interests in a partnership will not be
considered readily tradable on a secondary market or the substantial equivalent
thereof if (i) all interests in such partnership were issued in a transaction
(or transactions) that was not required to be registered under the Securities
Act of 1933 (the "Securities Act") and (ii) the partnership does not have more
than 100 partners at any time during the taxable year of the partnership.
As discussed above, it is our opinion that the Notes will be treated as
debt and will not be viewed to constitute interests in a partnership for federal
income tax purposes. The membership interest in the Issuer will be issued to the
SPC and the SPC will be required to retain such interest, except that such
interest may be transferred in connection with a sale of all or substantially
all of the assets of the SPC, provided that such transfer is exempt from
registration under the Securities Act. Thus, no interests in the Issuer will be
issued in a transaction that is required to be registered under the Securities
Act of 1933.
Based upon the foregoing and on our opinion that the Notes will be treated
as debt for federal income tax purposes, it is our opinion that the Issuer will
not be characterized as a "publicly traded partnership" taxable as a corporation
for federal income tax purposes.
We express no opinions other than those expressly set forth above.
Except as provided below, the foregoing opinions are being furnished to you
solely for your benefit and may not be relied upon by, nor may copies be
delivered to, any other person without our prior written consent.
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Conseco Finance Corp.
July __, 2000
Page 6
We hereby consent to the inclusion of this opinion as an exhibit to the
Registration Statement (File Nos. 333-85811 and 333-85811-01) and to the use of
our name under the heading "Federal Income Tax Consequences" in the Prospectus,
and we hereby confirm that the discussion under such heading accurately sets
forth our advice as to the likely outcome of material issues under the federal
income tax laws.
Dated: July __, 2000
Very truly yours,
