As filed with the Securities and Exchange Commission on May 15, 1997
Registration No. 33-4077
811-4623
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 21 X
-
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
ACT OF 1940
Amendment No. 21 X
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FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND
(Exact name of Registrant as specified in charter)
Ms. Concetta Durso
Secretary and Vice President
First Investors Multi-State Insured Tax Free Fund
95 Wall Street
New York, New York 10005
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement
It is proposed that this filing will become effective on May 16, 1997 pursuant
to paragraph (b) of Rule 485
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant has
previously elected to register an indefinite number of shares of beneficial
interest, no par value, under the Securities Act of 1933. Registrant filed a
Rule 24f-2 Notice for its fiscal year ending December 31, 1996 on February 27,
1997.
<PAGE>
The sole purpose of this Post-Effective Amendment No. 21 is to electronically
file certain exhibits previously filed with the Commission in paper format.
Parts A and B of this Post-Effective Amendment No. 21 have been filed with the
Commission on April 17, 1997 in Registrant's Post-Effective Amendment No. 20
(File No. 33-4077).
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Financial Statements are set forth in Part B, Statement of Additional
Information.
(b) Exhibits:
(1)/2/ Amended and Restated Declaration of Trust
(2)/2/ By-laws
(3) Not Applicable
(4) Shareholders' rights are contained in (a) Articles III,
VIII, X, XI and XII of Registrant's Amended and Restated
Declaration of Trust dated October 30, 1985, as amended
September 22, 1994, previously filed as Exhibit 99.B1 to
Registrant's Registration Statement and (b) Articles III
and V of Registrant's By-laws, previously filed as
Exhibit 99.B2 to Registrant's Registration Statement.
(5)/2/ Investment Advisory Agreement between Registrant and First
Investors Management Company, Inc.
(6)/2/ Underwriting Agreement between Registrant and First
Investors Corporation.
(7) Not Applicable
(8)a./2/ Custodian Agreement between Registrant and Irving Trust
Company
b./2/ Supplement to Custodian Agreement
(9)a./2/ Administration Agreement between Registrant, First
Investors Management Company, Inc., First Investors
Corporation and Administrative Data Management Corp.
b. Schedule A to Administration Agreement
(10)a./1/ Opinion of Counsel
b. Opinion of Arizona tax counsel
c. Opinion of California tax counsel
c. Opinion of Colorado tax counsel
d./3/ Opinion of Connecticut tax counsel
e./3/ Opinion of Florida tax counsel
f. Opinion of Georgia tax counsel
g./4/ Opinion of Maryland tax counsel
h. Opinion of Massachusetts tax counsel
i. Opinion of Michigan tax counsel
j. Opinion of Minnesota tax counsel
k. Opinion of Missouri tax counsel
l./3/ Opinion of New Jersey tax counsel
m. Opinion of North Carolina tax counsel
n. Opinion of Ohio tax counsel
o. Opinion of Oregon tax counsel
p. Opinion of Pennsylvania tax counsel
q. Opinion of Virginia tax counsel
(11)a. Consent of independent accountants
b./2/ Powers of Attorney
c. Consent of Arizona tax counsel
d. Consent of California tax counsel
e. Consent of Colorado and Georgia tax counsel
f. Consent of Connecticut tax counsel
g. Consent of Florida tax counsel
h. Opinion and Consent of Maryland tax counsel
i. Consent of Massachusetts tax counsel
j. Consent of Michigan tax counsel
k. Consent of Minnesota tax counsel
l. Consent of Missouri tax counsel
m. Consent of New Jersey tax counsel
n. Consent of North Carolina tax counsel
o. Consent of Ohio tax counsel
p. Consent of Oregon tax counsel
q. Consent of Pennsylvania tax counsel
r. Consent of Virginia tax counsel
<PAGE>
(12) Not applicable
(13) No undertaking in effect
(14) Not Applicable
(15)a./2/ Amended and Restated Class A Distribution Plan
b./2/ Class B Distribution Plan
(16)/4/ Performance Calculations
(17) Not applicable
(18)/2/ 18f-3 Plan
- ----------
/1/ Incorporated by reference from Registrant's Rule 24f-2 Notice for its
fiscal year ending December 31, 1996 filed on February 27, 1997.
/2/ Incorporated by reference from Post-Effective Amendment No. 19 to
Registrant's Registration Statement (File No. 33-4077) filed on April
25, 1996.
/3/ Incorporated by reference from Post-Effective Amendment No. 18 to
Registrant's Registration Statement (File No. 33-4077) filed on April
25, 1996.
/4/ Incorporated by reference from Post-Effective Amendment No. 20 to
Registrant's Registration Statement (File No. 33-4077) filed on April
17, 1997.
Item 25. Persons Controlled by or under common control with Registrant
There are no persons controlled by or under common control with
the Registrant.
Item 26. Number of Holders of Securities
Number of Record
Holders as of
Title of Class May 2, 1997
-------------- ----------------
Class A Class B
Arizona Fund 354 15
California Fund 433 8
Colorado Fund 241 13
Connecticut Fund 635 63
Florida Fund 683 40
Georgia Fund 144 18
Maryland Fund 420 33
Massachusetts Fund 888 34
Michigan Fund 1,183 34
Minnesota Fund 342 2
Missouri Fund 117 8
North Carolina Fund 250 13
Ohio Fund 810 22
New Jersey Fund 1,677 49
Oregon Fund 579 26
Pennsylvania Fund 1,218 45
Virginia Fund 853 48
Item 27. Indemnification
Article XI, Section 1 of Registrant's Declaration of Trust
provides as follows:
Section 1.
Provided they have exercised reasonable care and have acted under the
reasonable belief that their actions are in the best interest of
<PAGE>
the Trust, the Trustees shall not be responsible for or liable in any event for
neglect or wrongdoing of them or any officer, agent, employee or investment
adviser of the Trust, but nothing contained herein shall protect any Trustee
against any liability to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Article XI, Section 2 of Registrant's Declaration of Trust provides as
follows:
Section 2.
(a) Subject to the exceptions and limitations contained in Section
(b) below:
(i) every person who is, or has been, a Trustee or officer of the Trust (a
"Covered Person") shall be indemnified by the Trust to the fullest extent
permitted by law against liability and against expenses reasonably incurred or
paid by him in connection with any claim, action, suit or proceeding which he
becomes involved as a party or otherwise by virtue of his being or having been a
Trustee or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply to
all claims, actions, suits or proceedings (civil, criminal or other, including
appeals), actual or threatened, and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
(b) No indemnification shall be provided hereunder to a Covered
Person:
(i) Who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a determination
that such Trustee or officer did not engage in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office,
(A) by the court or other body approving the settlement; or
(B) by at least a majority or those Trustees who are
neither interested persons of the Trust nor are
parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type
inquiry); or
(C) by written opinion of independent legal counsel based
upon a review of readily available facts (as opposed
to a full trial-type inquiry); provided, however,
that any Shareholder may, by appropriate legal
proceedings, challenge any such determination by the
Trustees, or by independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person. Nothing contained herein shall affect any
rights to indemnification to which Trust personnel, other than Trustees and
officers, and other persons may be entitled by contract or otherwise under the
law.
<PAGE>
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
paragraph (a) of this Section 2 may be paid by the Trust from time to time prior
to final disposition thereof upon receipt of an undertaking by or on behalf of
such Covered Person that such amount will be paid over by him to the Trust if it
is ultimately determined that he is not entitled to indemnification under this
Section 2; provided, however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the Trust is insured
against losses arising out of any such advance payments or (c) either a majority
of the Trustees who are neither interested persons of the Trust nor are parties
to the matter, or independent legal counsel in a written opinion, shall have
determined, based upon a review of readily available facts (as opposed to a full
trial-type inquiry), that there is a reason to believe that such Covered Person
will be found entitled to indemnification under this Section 2.
The general effect of this Indemnification will be to indemnify
the officers and Trustees of the Registrant from costs and expenses arising from
any action, suit or proceeding to which they may be made a party by reason of
their being or having been a Trustee or officer of the Registrant, except where
such action is determined to have arisen out of the willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of the Trustee's or officer's office.
The Registrant's Investment Advisory Agreement provides as follows:
The Manager shall not be liable for any error of judgment or mistake of
law or for any loss suffered by the Company or any Series in connection with the
matters to which this Agreement relate except a loss resulting from the willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement. Any person, even though also an officer, partner, employee, or agent
of the Manager, who may be or become an officer, Board member, employee or agent
of the Company shall be deemed, when rendering services to the Company or acting
in any business of the Company, to be rendering such services to or acting
solely for the Company and not as an officer, partner, employee, or agent or one
under the control or direction of the Manager even though paid by it.
The Registrant's Underwriting Agreement provides as follows:
The Underwriter agrees to use its best efforts in effecting the sale and
public distribution of the shares of the Fund through dealers and to perform its
duties in redeeming and repurchasing the shares of the Fund, but nothing
contained in this Agreement shall make the Underwriter or any of its officers
and directors or shareholders liable for any loss sustained by the Fund or any
of its officers, trustees, or shareholders, or by any other person on account of
any act done or omitted to be done by the Underwriter under this Agreement
provided that nothing herein contained shall protect the Underwriter against any
liability to the Fund or to any of its shareholders to which the Underwriter
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of its duties as Underwriter or by reason of its
reckless disregard of its obligations or duties as Underwriter under this
Agreement. Nothing in this Agreement shall protect the Underwriter from any
liabilities which they may have under the Securities Act of 1933 or the
Investment Company Act of 1940.
<PAGE>
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to trustees, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable. See Item 32 herein.
Item 28. Business and Other Connections of Investment Adviser
First Investors Management Company, Inc., the Registrant's Investment
Adviser, also serves as Investment Adviser to:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Series Fund II, Inc.
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Global Fund, Inc.
First Investors Life Series Fund
First Investors New York Insured Tax Free Fund, Inc.
First Investors Special Bond Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
Affiliations of the officers and directors of the Investment Adviser are
set forth in Part B, Statement of Additional Information, under "Directors or
Trustees and Officers."
Item 29. Principal Underwriters
(a) First Investors Corporation, Underwriter of the Registrant, is
also underwriter for:
First Investors Cash Management Fund, Inc.
First Investors Series Fund
First Investors Series Fund II, Inc.
First Investors Fund For Income, Inc.
First Investors Government Fund, Inc.
First Investors High Yield Fund, Inc.
First Investors Insured Tax Exempt Fund, Inc.
First Investors Global Fund, Inc.
First Investors New York Insured Tax Free Fund, Inc.
First Investors Tax-Exempt Money Market Fund, Inc.
First Investors U.S. Government Plus Fund
(b) The following persons are the officers and directors of the
Underwriter:
<PAGE>
Position and Position and
Name and Principal Office with First Office with
Business Address Investors Corporation Registrant
- ------------------ --------------------- ------------
Glenn O. Head Chairman President
95 Wall Street and Director and Trustee
New York, NY 10005
Marvin M. Hecker President None
95 Wall Street
New York, NY 10005
John T. Sullivan Director Chairman of the
95 Wall Street Board of Trustees
New York, NY 10005
Roger L. Grayson Director Trustee
95 Wall Street
New York, NY 10005
Joseph I. Benedek Treasurer Treasurer
581 Main Street
Woodbridge, NJ 07095
Robert Murphy Comptroller None
581 Main Street
Woodbridge, NJ 07095
Lawrence A. Fauci Senior Vice President None
95 Wall Street and Director
New York, NY 10005
Kathryn S. Head Vice President, Trustee
581 Main Street Chief Financial
Woodbridge, NJ 07095 Officer and Director
Louis Rinaldi Senior Vice None
581 Main Street President
Woodbridge, NJ 07095
Frederick Miller Senior Vice None
581 Main Street President
Woodbridge, NJ 07095
Howard M. Factor Vice President None
95 Wall Street
New York, NY 10005
Larry R. Lavoie Secretary and None
95 Wall Street General Counsel
New York, NY 10005
Matthew Smith Vice President None
581 Main Street
Woodbridge, NJ 07095
Jeremiah J. Lyons Director None
56 Weston Avenue
Chatham, NJ 07928
Anne Condon Vice President None
581 Main Street
Woodbridge, NJ 07095
Jane W. Kruzan Director None
232 Adair Street
Decatur, GA 30030
Elizabeth Reilly Vice President None
581 Main Street
Woodbridge, NJ 07095
(c) Not applicable
<PAGE>
Item 30. Location of Accounts and Records
Physical possession of the books, accounts and records of the
Registrant are held by First Investors Management Company, Inc. and its
affiliated companies, First Investors Corporation and Administrative Data
Management Corp., at their corporate headquarters, 95 Wall Street, New York, NY
10005 and administrative offices, 581 Main Street, Woodbridge, NJ 07095, except
for those maintained by the Registrant's Custodian, The Bank of New York, 48
Wall Street, New York, NY 10286.
Item 31. Management Services
Inapplicable
Item 32. Undertakings
The Registrant undertakes to carry out all indemnification
provisions of its Declaration of Trust, Advisory Agreement and Underwriting
Agreement in accordance with Investment Company Act Release No. 11330 (September
4, 1980) and successor releases.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the provisions under Item 27 herein, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such trustee, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The Registrant hereby undertakes to furnish a copy of its latest
annual report to shareholders, upon request and without charge, to each person
to whom a prospectus is delivered.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant represents that this Amendment
meets all the requirements for effectiveness pursuant to Rule 485(b) under the
Securities Act of 1933, and has duly caused this Post-Effective Amendment to
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on the
14th day of May, 1997.
FIRST INVESTORS MULTI-STATE
INSURED TAX FREE FUND
(Registrant)
By: /s/ Glenn O. Head
-----------------
Glenn O. Head
President and Trustee
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, this Amendment to this Registration Statement
has been signed below by the following persons in the capacities and on the
dates indicated.
/s/ Glenn O. Head Principal Executive May 14, 1997
- ------------------------- Officer and Director
Glenn O. Head
/s/ Joseph I. Benedek Principal Financial May 14, 1997
- ------------------------- and Accounting Officer
Joseph I. Benedek
* Director May 14, 1997
- -------------------------
Kathryn S. Head
* Director May 14, 1997
- -------------------------
Roger L. Grayson
* Director May 14, 1997
- -------------------------
Herbert Rubinstein
* Director May 14, 1997
- -------------------------
Nancy Schaenen
* Director May 14, 1997
- -------------------------
James M. Srygley
* Director May 14, 1997
- -------------------------
John T. Sullivan
* Director May 14, 1997
- -------------------------
Rex R. Reed
* Director May 14, 1997
- -------------------------
Robert F. Wentworth
*By: /s/ Larry R. Lavoie
-------------------
Larry R. Lavoie
Attorney-in-fact
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
99.B.9 Schedule A to Admin. Agreement
99.B10.1 Opinion of Arizona tax counsel
99.B10.2 Opinion of California tax counsel
99.B10.3 Opinion of Colorado tax counsel
99.B10.4 Opinion of Georgia tax counsel
99.B10.5 Opinion of Massachusetts tax counsel
99.B10.6 Opinion of Michigan tax counsel
99.B10.7 Opinion of Minnesota tax counsel
99.B10.8 Opinion of Missouri tax counsel
99.B10.9 Opinion of North Carolina tax counsel
99.B10.10 Opinion of Ohio tax counsel
99.B10.11 Opinion of Oregon tax counsel
99.B10.12 Opinion of Pennsylvania tax counsel
99.B10.13 Opinion of Virginia tax counsel
ADMINISTRATION AGREEMENT
SCHEDULE A
Compensation and charges of Administrative Data Management Corp. for
services as Transfer Agent, Dividend Disbursing Agent and Plan Administration,
and for other services under the Administration Agreement.
Opening New Account $5.00 for each account
Processing Payments $0.75 for each payment*
Processing Share Certificates $3.00 per certificate issued
General Account Maintenance $0.65 per account per month
Legal Transfers of Shares $10.00 per transfer
Dividend Processing $0.45 per account per dividend
declared
Partial Withdrawals and
Complete Liquidations $5.00 per transaction
Reports Required by
Governmental Authorities $1.00 for each account
Exchange Fee $5.00 for each exchange of shares
into a Fund
Systematic Withdrawal Plans $1.00 for each SWP check*
OUT-OF-POCKET EXPENSES: In addition to the above charges, the Fund, First
Investors Management Company, Inc. or First Investors Corporation shall
reimburse Administrative Data Management Corp. for all out-of-pocket costs
including but not limited to postage, insurance, forms relating to shareholders
of the Fund, envelopes and other similar items, and will also reimburse
Administrative Data Management Corp. for counsel fees, including fees for the
preparation of the Administration Agreement and review of prospectus and
application forms.
THE ABOVE FEES AND OUT-OF-POCKET EXPENSES APPLY TO THE FOLLOWING FUNDS:
FIRST INVESTORS FUND FOR INCOME, INC., FIRST INVESTORS GLOBAL FUND, INC., FIRST
INVESTORS GOVERNMENT FUND, INC., FIRST INVESTORS HIGH YIELD FUND, INC., FIRST
INVESTORS INSURED TAX EXEMPT FUND, INC., FIRST INVESTORS MULTI-STATE INSURED TAX
FREE FUND, FIRST INVESTORS NEW YORK INSURED TAX FREE FUND, INC., FIRST INVESTORS
SERIES FUND, FIRST INVESTORS SERIES FUND II, INC., FIRST INVESTORS U.S.
GOVERNMENT PLUS FUND - 1st, 2nd & 3rd SERIES, EXECUTIVE INVESTORS TRUST
*Administrative Data Management Corp. (ADM) bills the Fund. ADM is then paid by
the Fund, after which FIMCO reimburses the Fund.
The Law Offices of
O'Connor, Cavanagh, Anderson, Westover, Killingsworth & Beshears
A Professional Association
April 7, 1993
First Investors Multi-State Insured
Tax Free Fund Arizona Series
95 Wall Street
New York, New York 10005
Ladies and Gentlemen:
We have acted as special Arizona legal counsel to the Arizona
Series (the "Arizona Series") of First Investors Multi-State Insured Tax Free
Fund (the "Fund") in connection with the review of certain sections of the
proposed Prospectus (the "Prospectus") and Statement of Additional Information
supplementing the Prospectus (the "Statement") contained in the Post-Effective
Amendment No. 14 to the Fund's Registration Statement (File No. 33-4077)
proposed to be filed with the Securities and Exchange Commission. You have
requested our opinion regarding the taxability under Arizona law of
distributions from the Arizona Series that are received by Arizona investors.
Unless otherwise defined in this opinion, any capitalized words used herein
shall have the same meanings assigned to such words in the Prospectus and the
Statement.
In rendering this opinion, we have examined only the proposed
Prospectus and Statement. In rendering the opinions set forth herein, we have,
with your approval, relied upon the authenticity and genuineness of the
foregoing documents and upon the following assumptions:
1. The Arizona Series has operated and will continue to
operate in the manner described in the Prospectus and Statement.
2. At the close of each quarter of each taxable year of the
Arizona Series, at least 50 percent of the value of its total assets will
consist of bonds the interest on which is exempt from Arizona state income
taxation under the Arizona Constitution or the laws of Arizona or under the
United States Constitution or the laws of the United States.
3. During the period that the Arizona Series seeks to be
eligible to pay Arizona exempt-interest dividends, it shall be classified as a
regulated investment company under Sections 851-855, inclusive, of the Internal
Revenue Code of 1986, as amended.
4. The state of Arizona's income tax is imposed on Arizona
"taxable income" consisting of the federal taxable income adjusted by certain
additions and reduced by certain
<PAGE>
subtractions, including the allowance of certain deductions, not relevant to
certain opinions stated herein. Therefore, in connection with rendering the
opinions expressed herein, we have relied on and assumed the correctness of the
descriptions in the Prospectus and the Statement of the federal income tax
treatment of the Arizona Series and investors in the Arizona Series.
You have not requested, and we do not express, an opinion
concerning (i) any issues relating to the federal or state tax treatment of the
Arizona Series or its investors other than with respect to the Arizona state
income tax treatment of the Arizona Series' investors or (ii) whether the
Arizona Series has qualified or will continue to qualify to pay Arizona
exempt-interest dividends.
Under Arizona law, the federal adjusted gross income of
Arizona taxpayers becomes their Arizona gross income. Arizona taxpayers must
then add to their Arizona gross income all interest on obligations of any state
(other than Arizona) or U.S. territory (or their political subdivisions) allowed
to be deducted in computing federal gross income. The interest derived from
obligations of the United States may then be subtracted from Arizona gross
income to arrive at Arizona adjusted gross income. The Arizona Department of
Revenue has ruled that interest derived from obligations of the governments of
Puerto Rico, the Virgin Islands or Guam will also be subtracted. There is no
distinction between Arizona's tax treatment of interest received by a direct
investor as compared with a mutual fund investor. The interest retains it same
character when "flowed through" the mutual fund and is subject to taxation
accordingly.
Therefore, in our opinion, distributions from the Arizona
Series that are received by investors in the Arizona Series that are
individuals, corporations, estates and trusts subject to Arizona income taxation
will not be subject to Arizona income tax to the extent that those distributions
are attributable to interest on (i) tax exempt obligations of the State of
Arizona, (ii) obligations of the United States and (iii) obligations of the
governments of Puerto Rico, the Virgin Islands or Guam. Other distributions from
the Arizona Series, including those related to short-term and long-term capital
gains, generally will be taxable under Arizona law when received by Arizona
investors. Interest on indebtedness incurred (directly and indirectly) by an
investor to purchase or carry an interest in the Arizona Series should not be
deductible for Arizona income purposes to the extent that the Arizona Series
holds tax exempt obligations of the State of Arizona or obligations of the
United States, Puerto Rico, the Virgin Islands or Guam. It should be noted that
income derived from interest on securities which are merely guaranteed by the
federal government or from repurchase agreements collateralized by United States
government obligations is not excluded and is subject to Arizona income tax.
<PAGE>
The opinion expressed in this letter is subject to the
assumptions, conditions, representations and limitations described above, is
limited to the laws of the state or Arizona, and is based upon an analysis of
the relative Arizona statutes, court decisions, and administrative decisions and
pronouncements, including Ruling 84-10-5 issued by the Arizona Department of
Revenue in 1984 and the policy statement issued by the Arizona Department of
Revenue in the March/April 1989 Arizona Taxes.
We have not considered, and express no opinion on the laws of,
any other jurisdiction, including the United States of America. You should be
aware that the foregoing opinion is not binding on Arizona courts or
administrative agencies, including the Arizona Department of Revenue, and a
court or agency may hold or act contrary to our opinion. In addition, our
opinion represents only our good-faith evaluation of applicable Arizona
statutes, administrative decisions and pronouncements, and court decisions, any
of which could be changed or overruled at a future date with retroactive effect.
In rendering the foregoing opinion, we have reviewed only those authorities
available to us on the date preceding the date of this letter; we assume no
responsibility for changes in Arizona law occurring after such date.
This opinion is furnished by us as special Arizona counsel to
the Fund and may not be assigned, used or quoted without our prior written
consent. We hereby consent to the filing of this opinion as an exhibit to the
Post-Effective Amendment No. 14 to the Fund's Registration Statement (File No.
33-4077) and to the reference to our firm in such Registration Statement and in
the Prospectus included therein.
Very truly yours,
/s/ O'Connor, Cavanagh, Anderson,
Westover, Killinsworth &
Beshears, P.A.
PARKER, MILLIKEN, CLARK, O'HARA & SAMUELIAN
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
333 SOUTH HOPE STREET, 27TH FLOOR
LOS ANGELES, CALIFORNIA 90071-1488
TELEPHONE (213)683-6500
February 26, 1992
First Investors Multi-State
Insured Tax-Free Fund
95 Wall Street
New York, New York 10005
Re: California Insured Tax-Free Series
Gentlemen:
You have requested our opinion regarding taxation of the
California Insured Tax-Free Series ("California Series") of the First Investors
Multi-State Insured Tax-Free Fund (the "Fund") and investors in the California
Series who are California resident individuals, estates, trusts and corporations
under the California personal income, bank and corporation, and state property
tax laws.
In rendering this opinion, we have relied solely upon the
facts stated and representations made in Post-Effective Amendment Number 12 to
the Fund's Registration Statement to be filed on Form N-1A with respect to the
California Series under the Securities Act of 1933 and the Investment Company
Act of 1940. The opinions expressed herein represent our judgment regarding the
proper treatment of the California Series and the shareholders thereof on the
basis of our analysis of the provisions of the California Revenue and Taxation
Code ("R&T Code"), case law and the regulations and published rulings of the
California Franchise Tax Board (the "Board") which exist as of the time this
opinion is rendered, all of which are subject to prospective or retroactive
change.
FACTS AND ASSUMPTIONS
UPON WHICH OPINION IS BASED
Based upon such facts and the representations and legal
conclusions contained in the documents referred to in the preceding paragraph,
we have specifically assumed the following facts and legal conclusions in
rendering this opinion and render no opinion with respect to the subject matter
thereof:
The Fund is a duly organized and validly existing business
trust under the laws of the Commonwealth of Massachusetts and has registered
with the Securities and Exchange
<PAGE>
commission (the "Commission") as a diversified open-end management company under
the Investment company Act of 1940 (the "Act"). The investment objective of the
California Series is to provide shareholders with high current income exempt
from federal income tax and California personal income taxes. The term "federal
income tax" as used herein refers to the regular income tax and the alternative
minimum tax.
The California Series is properly treated for federal income
tax purposes as an association taxable as a corporation under Section 7701(a)(3)
of the Internal Revenue Code of 1986, as amended (the "IRC"), and that for each
of its taxable years, the California Series will qualify as a regulated
investment company ("IRC") under Subchapter M of the IRC.
You have specifically represented to us that under normal
market conditions, at least 80% of the value of the assets of the California
Series will be invested in obligations issued by the State of California and its
municipalities, political subdivisions and governmental agencies and
instrumentalities the interest on which if held by individuals is exempt from
federal income tax and also from California personal income tax ("California
Municipal Instruments"). For federal income tax purposes, the California Series
will be eligible in each taxable year to distribute exempt-interest dividends
under Section 852(b)(5) of the IRC, because at the close of each quarter of its
taxable year, at least 50% of the value of its total assets will be invested in
obligations the interest on which is exempt from federal income tax under
Section 103(a) of the IRC. Therefore, for federal income tax purposes, the
California Series will be able to pass through to its shareholders the
tax-exempt character of interest income on its holdings of California Municipal
Instruments.
Taxation of the California Series.
The California Bank and Corporation Tax Law (Part 11, Div. II,
of the R&T Code) contains provisions largely comparable to the provisions of
Subchapter M of the IRC which govern the taxation of RICs. The California
provisions governing the taxation of RICs contained in R&T Code Section 24412
differ from their federal counterparts in that:
A. Under the IRC, net capital gains and ordinary income of RICs are
differentiated, and are subject to tax separately if they are not
distributed as dividends. California does not compute income from
capital gains and ordinary income separately nor does it characterize,
for purposes of the dividends paid deduction, distributions from
capital gains any differently than those from ordinary income. Further,
under the IRC, there is a limited rate above which net long-term
capital gains of RICs are not taxed. California law does not
differentiate between capital gains and ordinary
<PAGE>
income as to the rate of tax.
B. California law provides for a more limited net operating loss
deduction than under federal law. Specifically (and in addition to
other more technical rules of limited application), no carrybacks are
allowed and carryforwards are limited to fifty percent of the
California net operating loss.
C. The denial of the availability to RICs of the dividends received
deductions under the IRC is modified under the R&T Code to deny the
comparable deductions otherwise available under California law.
D. California allows to RICs a dividends paid deduction for amounts
received by RICs which are exempt interest under the IRC, but which are
included in the RICs gross income for California purposes and
distributed as dividends.
Accordingly, based upon the assumption that the California
Series is a RIC under federal law, except as to those matters noted above, the
California Series will not be subject to California tax on its income to the
same extent it is not subject to federal income tax.
Taxation of California Resident Individuals, Estates and Trusts
The California Personal Income Tax Law, codified as Part 10,
Div. II, of the R&T Code, largely incorporates by reference the IRC as amended
through January 1, 1991, with certain exclusions and modifications. Resident
individuals, estates and trusts are subject to tax under Sections 17041(a) and
(e) on their taxable income. In all cases, "taxable income" is defined as in
Section 63 of the IRC with a few exceptions not relevant here (R&T Code Section
17073). Therefore, taxable income equals adjusted gross income minus certain
deductions (with certain exceptions noted in Section 17072). Adjusted gross
income is in turn derived from gross income under Section 61 of the IRC.
R&T Code Section 17133 provides that California gross income
does not include income which the state is prohibited from taxing under the
constitution or laws of the United States of America or under the Constitution
of the State. Article XIII, Section 26(b), of the California Constitution
states, "Interest on bonds issued by the State or a local government in the
State is exempt from taxes on income." Therefore, the interest on certain
California income tax pursuant to which such obligations were issued, which
legislation may also derive its ultimate authority from Article XIII, Section
26(b), of the Constitution. In both cases, the exemption applies if the
obligations are held directly by resident individuals, estates and trusts.
<PAGE>
California has incorporated provisions which have largely the
same effect as provisions of the IRC concerning the taxation of individuals,
estates and trusts on dividends of tax exempt income received from RICs, except
as to the treatment of undistributed capital gains of IRC Section 852(b)(3)(D)
which does not apply for California purposes, and the special California rules
for "exempt interest dividends." R&T Code Section 17088. "Exempt interest
dividends" may be paid to California resident individuals, estates and trusts
without their inclusion in the taxable income of such taxpayers if they are paid
by a "management company" and certain tests are met.
Under R&T Code Section 17145, in order for a management
company (the definition of which includes RICs qualified as such under R&T Code
Section 24412) to be eligible to pay "exempt interest dividends," at least fifty
percent of the fair market value of its total assets on the last day of each
quarter of its taxable year must be held in the form of obligations which, when
held by an individual, the interest from them is exempt from California tax.
"Exempt interest dividends" are dividends paid by a management company during a
taxable year, properly designated as such, less certain expenses related to
exempt income, and which do not exceed the interest received by the management
company which would be exempt from California tax if received by a California
resident individual. In order for exempt interest dividends to be properly
designated, they must be designated as exempt interest dividends by the paying
management company or series thereof in a written notice mailed to shareholders,
not later than sixty days after the close of the taxable year of the management
company in which they are paid.
The expenses that reduce exempt interest dividends are the
expenses relating to tax exempt income which would be nondeductible if the RIC
were an individual, such as interest on debts incurred to purchase or carry tax
exempt bonds, and the amount of bond premium on tax exempt bonds which would be
nondeductible if the RIC were an individual. The manner in which the expenses
are used to reduce otherwise exempt interest dividends is to limit the maximum
amount of a shareholder's exempt interest dividends to the shareholder's
allocable sum of 1) interest on obligations which is exempt under California law
<PAGE>
plus 2) interest on tax exempt obligations of the United States(1) less 3) the
amount of the expenses calculated under the preceding sentence.
Thus, only that portion of dividends received by a California
individual, trust or estate from a RIC will be exempt from California tax which
is proportionate to the percentage of interest received by the RIC from
obligations which are themselves exempt from California tax (Appeal of Smith, 5
SBE 42 (SBE, October 9, 1991)). Further, only that portion of those dividends
will be exempt which is the same proportion as the designated dividends less the
nondeductible expenses, divided by the amount of the designated dividends.
Based upon the assumption that the California Series is a RIC
under the IRC and the further assumption that more than fifty percent of its
assets at the end of each quarter will be in the form of California Municipal
Instruments, distributions, less allocable nondeductible expenses as discussed
above, made by the California Series to individuals, estates and trusts resident
in California will be exempt from California Personal Income Tax to the extent
the distributions are properly designated as "exempt interest dividends," and
are derived from California Municipal Instruments or instruments of the United
States which would be exempt from the California Personal Income Tax if such
instruments were held directly by an individual.
Capital gain dividends and other dividends derived from
sources other than those referred to in the preceding sentence which are
distributed by the California Series will be fully includable in the California
taxable income of such individuals, estates and trusts.
- ---------------------
(1) There is apparently a technical error in the drafting of 1990
amendments to R&T Code Section 17145(b) that seemingly limits, through
application of this formula, the exclusion from California tax (apart from
interest directly exempt under the laws or Constitution of California) of only
federally tax-exempt interest of direct obligations of the United States and not
interest which is otherwise exempt under federal law of obligations issued by
United States Possessions (such as Guam, Puerto Rico and the U.S. Virgin
Islands). The remainder of the 1990 amendments appear intended to exclude from
California tax interest on obligations of U.S Possessions otherwise exempt under
federal law. Given the lack of official authority, however, we are unable to
opine that exempt interest dividends derived from otherwise tax-exempt
obligations of United States Possessions would be exempt from California
Personal Income Tax.
<PAGE>
Taxation of California Corporations
The California Bank and Corporation Tax Law imposes taxes on
various classes of corporations, all of which taxes are measured by net income.
The franchise tax is imposed by Section 23151 on all corporations doing business
in California and by Section 23181 on all banks and financial corporations
located in California. The corporation income tax is imposed by Section 23501 on
corporations which derive income from California sources but are not engaged in
business in California.
For purposes of the franchise tax, Section 24272 provides that
"gross income" includes all interest received from federal, state, municipal or
other bonds. Therefore, even if California Municipal Instruments were held
directly by corporations subject to such tax, interest on such obligations would
nevertheless be taxable to them. For purposes of the corporation income tax,
Article XIII, Section 26(b), of the California Constitution would require
exclusion of interest on such obligations from gross income if such obligations
were held directly by the corporation.
The California Bank and Corporation Tax Law has no provisions
comparable to Sections 852(b)(3) and (5) of the Code permitting regulated
investment companies to pass through to their shareholders the character of
their tax-free income and their capital gains. Therefore, all distributions made
by the California Series to corporations which are subject to either the
California franchise tax or the California corporate income tax will be taxable
as ordinary income to such corporations.
Property Taxes
Section 212 of the Revenue and Taxation Code exempts from
California property taxes "notes, debentures, shares of capital stock, solvent
credits, bonds, deeds of trust, mortgages, and any interest in such property."
We believe that shares of a regulated investment company which invests in
Municipal Instruments would be regarded as representing shares of capital stock
or an interest in bonds held by the shareholders. Therefore, shares of the
California Series will be exempt from California property taxes.
On the basis of the foregoing, it is our opinion that
(1) so long as the Fund qualifies as a RIC under IRC Section 851,
the California Series will be subject to taxation under the
California Bank and Corporation Tax Law only to the same
extent it is subject to tax under IRC Sections 851 through 855
and 860, except with respect to undistributed capital gains,
net operating loss carryforwards and carrybacks, the dividend
received deductions and the dividends paid deduction;
<PAGE>
(2) if the Fund qualifies as a RIC, and the California Series
operates so that at least 50% of the value of its total assets
is invested in California Municipal Instruments and/or
instruments of the United States exempt from California tax,
interest distributions, less allocable expenses, made by the
California Series to shareholders which are California
resident individuals, estates and trusts, not exceeding the
interest received by the California Series on California
Municipal Instruments or on direct Federal obligations, which
would be exempt from California Personal Income Tax if
received by an individual, and which distributions are
properly designated by the Series as "exempt interest
dividends," will not be includable in the income of such
shareholders for purposes of the California Personal Income
Tax. Capital gain distributions and distributions other than
"exempt interest dividends" made by the California Series will
be taxable to such shareholders as ordinary income and
potentially subject to the California alternative minimum tax;
(3) distributions made by the California Series to corporate
shareholders subject to tax in California will be subject to
the California franchise or corporate income taxes and will be
treated as ordinary income; and
(4) shares of the California Series will not be subject to the
California property tax in the hands of the holders thereof.
We hereby consent to the inclusion of this opinion as an
Exhibit to Post-Effective Amendment Number 12 to the Registration Statement
filed on behalf of the Fund with the Commission and the applications and
registration statements filed in accordance with the securities laws of the
several states in which shares of the Fund are to be offered. We further consent
to the references in the Prospectus to our firm and the fact that this opinion
has been rendered.
Very truly yours,
/s/Parker, Milliken, Clark, O'Hara & Samuelian
Parker, Milliken, Clark, O'Hara & Samuelian,
A Professional Corporation
KUTAK ROCK
A PARTNERSHIP
INCLUDING PROFESSIONAL CORPORATION
2400 ARCO TOWER
707 SEVENTEENTH STREET
DENVER, COLORADO 80202-3424
February 15, 1992
First Investors Multi-State Insured
Tax Free Fund - Colorado Series
95 Wall Street
New York, New York 10005-4297
Re: Certain Colorado Income Tax Matters
Ladies and Gentlemen:
We have acted as your special tax counsel in connection with certain
matters regarding the First Investors Colorado Insured Tax Free Series (the
"Fund"), a separate designated series of First Investors Multi-State Insured Tax
Free Fund. Specifically, you have asked us to consider the characterization
under the laws of the State of Colorado of certain interest income and
anticipated gain to be derived by the Fund. The opinions set forth below are
based upon a review of the provisions of the Colorado Income Tax Act of 1987
(the "Act") and interpretations thereof, and the assumption that the Fund will
be operated in a manner substantially identical to that described in that
certain Prospectus contained in Post-Effective Amendment No. 12 to the
Registration Statement filed on behalf of the Fund with the United States
Securities and Exchange Commission (the "SEC"), which will be used in connection
with the offer and sale of interests in the Fund.
We are of the opinion that dividend distributions from the Fund, to the
extent attributable to interest on obligations exempt from federal income tax
under the provisions of Section 103 (a) of the Internal Revenue Code of 1986, as
amended, (the "Code") issued by the State of Colorado or any political
subdivision thereof on or after May 1, 1980 may be excluded from the calculation
of income for purposes of the Act by individuals, estates and trusts. We are
further of the opinion that such individuals, estates and trusts may exclude
from the calculation of Colorado income tax dividend distributions from the Fund
to the extent attributable to interest on obligations of the United States, or
its possessions. We are, in addition, of the opinion that such individuals,
estates and trusts, will not be entitled to exclude from income any dividend
distributions from the Fund which are attributable to interest exempt from
federal income tax under Section 103(a) of the Code and attributable to
obligations
<PAGE>
issued by any other state or political subdivision thereof. Moreover, it is our
opinion that individuals, estates and trusts will not be entitled to exclude
from income any net short-term or long-term capital gain attributable to the
sale of shares in the Fund or any capital gain dividend received from the Fund.
Further, it is our opinion that corporations may exclude dividend
distributions from the Fund which are attributable to interest income exempt
from federal income tax under Section 103(a) of the Code from the calculation of
Colorado income tax to the extent attributable to obligations issued by the
State of Colorado or any political subdivision thereof. We are further of the
opinion that corporations may exclude from the calculation of Colorado income
tax, dividend distributions from the Fund to the extent attributable to interest
on obligations of the United States or its possessions. We are, in addition, of
the opinion that corporations will not be entitled to exclude from income any
dividend distributions from the Fund which are attributable to interest exempt
from federal income tax under Section 103(a) of the Code and attributable to
obligations issued by any other state or political subdivision thereof.
Moreover, it is our opinion that corporations will not be entitled to exclude
from income any net short-term or long-term capital gain attributable to the
sale of shares in the Fund or any capital gain dividend received from the Fund.
Please note that this opinion is based upon the provisions of the Act
in effect as of the date hereof. Subsequent changes in the Act or in the
interpretations thereof could preclude us from rendering a similar opinion in
the future. This opinion is intended solely for your benefit and does not
constitute personal tax advice to any investor in the Fund. Moreover, we have
rendered no opinion regarding the Fund, except as described herein.
We hereby consent to the inclusion of this opinion as an Exhibit to
Post-Effective Amendment No. 12 to the Registration Statement filed on behalf of
the Fund with the SEC (the "Registration Statement"), and to the applications
and registration statements filed in accordance with the securities laws of the
several states in which shares of the Fund are to be offered. We further consent
to the references in the Prospectus accompanying the Registration Statement to
our firm and the fact that this opinion has been rendered.
Very truly yours,
/s/ Kutak Rock
Kutak Rock
KUTAK ROCK
A PARTNERSHIP
INCLUDING PROFESSIONAL CORPORATION
4400 GEORGIA - PACIFIC CENTER
133 PEACHTREE STREET, N.E.
ATLANTA, GEORGIA 30303-1808
February 14, 1992
First Investors Multi-State Insured
Tax Free Fund - Georgia Series
95 Wall Street
New York, New York 10005-4297
Re: Certain Georgia Income Tax Matters
Ladies and Gentlemen:
We have acted as your special tax counsel in connection with certain
matters regarding the First Investors Georgia Insured Tax Free Series (the
"Fund"), a separate designated series of First Investors Multi-State Insured Tax
Free Fund. Specifically, you have asked us to consider the characterization
under the laws of the State of Georgia of certain interest income and
anticipated gain to be derived by the Fund. The opinions of the Georgia Public
Revenue Code (the "Act") and interpretations thereof, and the assumption that
the Fund will be operated in a manner substantially identical to that described
in that certain Prospectus contained in Post-Effective Amendment No. 12 to the
Registration Statement filed on behalf of the Fund with the United States
Securities and Exchange Commission (the "SEC"), which will be used in connection
with the offer and sale of interests in the Fund.
We are of the opinion that dividend distributions from the Fund, to the
extent attributable to interest on obligations exempt from federal income tax
under the provisions of Section 103 (a) of the Internal Revenue Code of 1986, as
amended, (the "Code") issued by the State of Georgia or any political
subdivision thereof may be excluded from the calculation of income for purposes
of the Act by individuals, estates and trusts. We are further of the opinion
that such individuals, estates and trusts may exclude from the calculation of
Georgia income tax dividend distributions from the Fund to the extent
arrtibutable to interest on obligations of the United States, its territories or
possessions or of any authority, commission or instrumentality of the United
States exempt from state income tax under federal law. We are, in addition, of
the opinion that such individuals, estates and trusts, will not be entitled to
exclude from income any dividend distributions from the Fund which are
<PAGE>
attributable to interest exempt from federal income tax under Section 103(a) of
the Code and attributable to obligations issued by any other state or political
subdivision thereof. Moreover, it is our opinion that individuals, estates and
trusts will not be entitled to exclude from income any net short-term or
long-term capital gain attributable to the sale of shares in the Fund or any
capital gain dividend received from the Fund.
Although the application of the Georgia intangible personal property
tax to the ownership of shares in the Georgia Series is not clear, we believe
that shares in the Georgia Series will be deemed to be taxable intangible
property separate from an ownership interest in the underlying tax-exempt
Georgia bonds. Further, we believe that the Fund will not be subject to the
Georgia intangible personal property tax as a result of holding obligations or
evidences of debt of Georgia, its political subdivisions and public institutions
because such obligations or evidences of debt are exempt from such tax.
Further, it is our opinion that corporations may exclude dividend
distributions from the Fund which are attributable to interest income exempt
from federal income tax under Section 103(a) of the Code from the calculation of
Georgia income tax to the extent attributable to obligations issued by the State
of Georgia or any political subdivision thereof. We are further of the opinion
that corporations may exclude from the calculation of Georgia income tax,
dividend distributions from the Fund to the extent attributable to interest on
obligations of the United States, its territories or possessions or of any
authority, commission or instrumentality of the United States exempt from state
income tax under federal law. We are, in addition, of the opinion that
corporations will not be entitled to exclude from income any dividend
distributions from the Fund which are attributable to interest exempt from
federal income tax under Section 103(a) of the Code and attributable to
obligations issued by any other state or political subdivision thereof.
Moreover, it is our opinion that corporations will not be entitled to exclude
from income any net short-term or long-term capital gain attributable to the
sale of shares in the Fund or any capital gain dividend received from the Fund.
Please note that this opinion is based upon the provisions of the Act
in effect as of the date hereof. Subsequent changes in the Act or in the
interpretations thereof could preclude us from rendering a similar opinion in
the future. This opinion is intended solely for your benefit and does not
constitute personal tax advice to any investor in the Fund. Moreover, we have
rendered no opinion regarding the Fund, except as described herein.
We hereby consent to the inclusion of this opinion as an Exhibit to
Post-Effective Amendment No. 12 to the Registration Statement filed on behalf of
the Fund with the SEC (the "Registration Statement"), and to the applications
and
<PAGE>
registration statements filed in accordance with the securities laws of the
several states in which shares of the Fund are to be offered. We further consent
to the references in the Prospectus accompanying the Registration Statement to
our firm and the fact that this opinion has been rendered.
Very truly yours,
/s/ Kutak Rock
Kutak Rock
PALMER & DODGE
One Beacon Street
Boston, Massachusetts 02108
April 14, 1993
First Investors Multi-State Insured Tax Free Fund
95 Wall Street
New York, New York 10005
Gentlemen:
We have acted as special Massachusetts tax counsel to you to determine
the Massachusetts personal income tax consequences of receipt of distributions
from the Massachusetts Series (the "Massachusetts Series") of the First
Investors Multi-State Insured Tax Free (the "Fund") by holders of shares of the
Massachusetts Series.
In rendering this opinion, we have relied on your representations that
the Fund is a corporate trust within the meaning of chapter 62, section 1(j) of
Massachusetts General laws and that the Massachusetts Series qualifies and will
continue to qualify as a separate regulated investment company within the
meaning of section 851 of the Internal Revenue Code of 1986, as amended (the
"Code").
Based on your representations and our examination of relevant laws, we
are of the opinion that under existing law holders of shares of the
Massachusetts Series who are subject to income taxation under Mass. G.L. c. 62
will not be subject to tax on distributions from the Massachusetts Series for
periods during which the Massachusetts Series qualifies as a regulated
investment company under section 851 of the Code, to the extent that these
distributions (1) qualify as exempt interest dividends of a regulated investment
company within the meaning of Code section 852(b)(5) which are directly
attributable to interest exempt from Massachusetts taxation under any provision
of law, on obligations issued by the Commonwealth of Massachusetts, its
instrumentalities or its political subdivisions, by the government of Puerto
Rico or by its authority, by the government of Guam or by its authority, or by
the government of the Virgin Islands or by its authority; (2) are attributable
to interest on obligations of the United States exempt from state income
taxation; or (3) qualify as capital gain dividends within the meaning of code
section 852(b)(3)(C) which are attributable to gain exempt from Massachusetts
taxation under any provision of law, on obligations issued by the Commonwealth
of Massachusetts, its instrumentalities or political subdivisions. The
Massachusetts Series must identify the items not subject to tax in a written
notice to the shareholders. Holders of shares of
<PAGE>
the Massachusetts Series who are subject to income taxation under Mass. G.L. c.
62 will generally be subject to tax on distributions which are from sources
other than those described above.
The material set forth under the caption "State income taxes.
Massachusetts" in the prospectus is a fair summary of this opinion. We consent
to the filing of this opinion as an exhibit to Post-Effective Amendment No.14 to
the Fund's Registration Statement on Form N-1A under the Securities Act of 1933,
as amended, and to the reference to us under the heading "State income taxes.
Massachusetts".
Very truly yours,
/s/Palmer & Dodge
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
COUNSELLORS AT LAW
25 NORTH WOODWARD AVENUE
P.O. BOX 509
BLOOMFIELD HILLS, MICHIGAN 48303-0509
April 1, 1993
First Investors Multi-State
Insured Tax Free Fund
95 Wall Street
New York, New York, 10005
Re: First Investors Tax Free Fund - Michigan Series
Ladies/Gentlemen:
We have acted as special Michigan counsel to the First
Investors Multi-State Insured Tax Free Fund (the "Fund") and you have requested
our opinion with respect to certain Michigan tax consequences of investments in
the Michigan Series shares of the Fund. We understand that you are preparing the
Post-Effective Amendment No. 14 to the Registration Statement on Form N-1A for
filing with the Securities and Exchange Commission (the "Registration
Statement") with respect to the Fund. We have examined the text of the Fund's
most recent Prospectus and statement of additional information and have
particularly reviewed the portions of such documents relating to Michigan taxes
and the risk factors affecting the Michigan Series.
The Fund is a diversified open-end management investment
company satisfying the requirements for qualification for federal income tax
purposes as a regulated investment company under Part I of Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). The Fund currently
consists of 12 separate series, one of which is the Michigan tax free series
(the "Michigan Series").
All of the Fund's assets (other than temporary investments)
will consist of federally tax-exempt obligations under Section 103(a) of the
Code and as a consequence, the Fund's dividends will be exempt from federal
income tax under Section 852(b)(5)(B) of the Code.
The Michigan Series will invest primarily in interest-bearing
obligations issued by or on behalf of the State of Michigan, political
subdivisions thereof and agencies and instrumentalities of the state or its
political subdivisions. It may also invest in interest-bearing obligations
issued by or on behalf of governments the securities of which bear interest
exempt from federal taxes and Michigan income tax, such as the
<PAGE>
governments of Puerto Rico, the Virgin Islands and Guam and their authorities or
municipalities. We also understand that in certain circumstances, the Michigan
Series may invest up to 20% of the value of its net assets in instruments, the
interest on which is exempt from federal income taxes but not Michigan state and
local income taxes. Furthermore, we understand that the Michigan Series may also
invest from time to time on a temporary basis in obligations issued or
guaranteed by the United States and its agencies, instrumentalities or
authorities and corporate debt securities, commercial paper and certificates of
deposit.
The investments of the Michigan Series, except any temporary
taxable investments, are insured as to payment of principal and interest by the
issuer or under an insurance policy written by an independent insurance company.
The Michigan Series will notify its shareholders by mail by
January 31 after the close of the calendar year as to the tax status of
distributions made during the calendar year.
Based upon the foregoing and upon an examination of such
documents and an investigation of such other matters of law as we have deemed
necessary, we are of the opinion that under existing law applicable to
shareholders of the Michigan Series:
1. Shareholders of the Michigan Series who are subject to
Michigan income tax or Michigan single business tax will not be subject to
Michigan income tax or Michigan single business tax on Michigan Series dividends
to the extent that the distributions qualify as exempt-interest dividends of a
regulated investment company under Section 852(b)(5) of the Code which are
attributable to interest on tax-exempt obligations of the State of Michigan, or
its political or governmental subdivisions, its governmental agencies or
instrumentalities (as well as certain other federally tax-exempt obligations,
the interest on which is exempt from Michigan tax, such as, for example, certain
obligations of Puerto Rico). If, however, distributions to shareholders of the
Michigan Series are derived from sources other than those described above,
including long or short-term capital gains, such distributions will not be
exempt from Michigan income tax or Michigan single business tax.
2. In late 1986, the Michigan Department of Treasury issued an
administrative bulletin which announced that holders of interests in regulated
investment companies who are subject to the Michigan intangibles tax will be
exempt from the intangibles tax to the extent that the companies' investment
portfolios consist of United States obligations and obligations of the State of
Michigan or its political subdivisions. In addition, Michigan Series shares
owned by certain financial institutions or by certain other persons subject to
the Michigan single business tax are exempt from the Michigan intangibles tax by
reason of the owners being subject to the single business tax.
<PAGE>
3. As respects a Michigan Series shareholder who is subject to
the Michigan single business tax (i.e., engages in "business activity" as
defined in the Michigan single business tax act), the occurrence of a taxable
event for such shareholder for federal income tax purposes when the Michigan
Series sells or exchanges obligations or the shareholder sells or exchanges
shares will affect the adjusted tax base upon which the single business tax is
computed. Any capital gain or loss realized from such taxable event which was
includable in the computation of the shareholder's federal taxable income, plus
the portion, if any, of such capital gain excluded in such computation and minus
the portion, if any, of the capital loss not deducted in such computation for
the year the loss occurred, will be included in the adjusted tax base. The
adjusted tax base of any person other than a corporation is affected by any gain
or loss realized from the taxable event only to the effect that the resulting
federal taxable income is derived from "business activity."
4. Under Michigan's uniform city income tax ordinance, which
authorizes the only income tax ordinance which may be adopted by cities in
Michigan, distributions from the Michigan Series which are not subject to
Michigan income tax will similarly not be subject to the Michigan uniform city
income tax.
We hereby consent to the filing of this opinion as an exhibit
to the referenced Registration Statement and to the reference to our Firm as
special Michigan counsel in the Registration Statement and in the related
Prospectus.
Very truly yours,
/s/ DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
DICKINSON, WRIGHT, MOON, VAN DUSEN & FREEMAN
FAEGRE & BENSON
2300 Multifoods Tower
33 South Sixth Street
Minneapolis, Minnesota 55402-3694
(612) 371-5300
November 17, 1986
First Investors Multi-State Insured
Tax Free Fund
120 Wall Street
New York, New York 10005
Gentlemen:
We are Minnesota tax counsel to First Investors Multi-State Insured Tax
Free Fund, a trust created under the laws of the State of Massachusetts and of
the type commonly known as a Massachusetts business trust (the "Trust"). We have
been informed that the Trust intends to qualify as a regulated investment
company as that term is defined and limited in section 851 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that it intends to take all
other action to ensure that the Trust may pay exempt-interest dividends as that
term is defined in section in section 852(b)(5)(A) of the Code. We understand
that it is the Trust's intention to sell separate classes of shares, as more
fully described below, each generally to residents of specified states, for the
purpose of enabling such residents to receive exempt-interest dividends that are
exempt from the regular federal income tax as well as from the regular income
tax imposed by the state of residence of the recipient shareholder.
You have asked our opinion of the Minnesota income tax consequences of
the receipt by a holder of shares of the Minnesota Insured Tax-Free Class of
Shares (the "Minnesota Class of Shares") of exempt-interest dividends as that
term is defined in section 852(b)(5)(A) of the Code that are payable with
respect to the Minnesota Class of Shares that are proposed to be issued by the
Trust. In responding to your inquiry, we have reviewed the Amended and Restated
Declaration of Trust of the Trust, (Declaration made October 30, 1985, and
amended September 30, 1986, and October 30, 1986 (the "Articles"), and certain
other materials that you have supplied to us. In addition, we have reviewed
certain of the laws of the State of Minnesota, and certain provisions of the
Code.
The Trust provides, in general, that it shall issue various classes of
shares, and that a "share" means the equal proportionate units of interest into
which the beneficial interest of each class of shares in the Trust shall be
divided. (Article I, Section 2(f), of the Articles). As stated in Article IV,
section 8, of the Articles, each shareholder of a class of shares has a
proportionate
<PAGE>
undivided beneficial interest in the assets belonging to such class of shares,
and all consideration received by the Trust from the issue or sale of a
particular class of shares, together with all assets in which such consideration
is invested, as well as all income, earnings and proceeds thereof, including
proceeds from the sale thereof, shall irrevocably belong to that class of shares
for all purposes, subject only to the rights of creditors of that class of
shares, and shall be so recorded on the books of the Trust. General items, which
are those that are not readily identifiable a belonging to any particular class
of shares, shall be allocated among the various classes of shares in a manner
which the Board of Trustees deems fair and equitable, and those items, along
with the ones previously referred to, are deemed to be the assets belonging to a
particular class.
Article IV, Section 9, of the Articles provides that the assets
belonging to each particular class shall be charged with the liabilities of the
Trust in respect of that class, and with all expenses, costs, charges and
reserves attributable to that class, all of which shall be recorded on the books
of the Trust. In addition, it is provided that general items of liability, cost,
expense, charge, or reserve, which are not readily identifiable as belonging to
any particular class of shares, will be allocated by the Board of trustees to
the various classes in a fair and equitable manner.
With respect to distributions, Article X, section 1, of the Articles
provides that dividends and distributions to the holders of a class of shares of
the Trust may be paid only from the income and gains and assets belonging to
that class of shares, after providing for liabilities belonging to that class of
shares. Article X, section 2, of the Articles provides that in the case of a
redemption of shares, a shareholder of a particular class of shares shall
receive the net asset value of such shares (which is defined in Article X,
section 3, of the Articles as the assets belonging to a particular class of
shares less the liabilities belonging thereto), and reiterates that the rights
of a shareholder of a particular class is limited in redemption to the assets
belonging to that particular of shares, less the liabilities belonging thereto.
In the case of a termination of the Trust, or any class of shares thereof,
Article XII, section 4, of the Articles provides that after disposing of the
assets of the Trust or the assets belonging to any affected class of shares of
the Trust, and upon making provisions for the payment of assumption of all
outstanding obligations, the Trustees of the Trust will distribute the remaining
proceeds or assets ratably among the holders of the shares of any affected class
of shares then outstanding.
Article VIII, section 1, of the Articles provides, in general, that the
shareholders shall be entitled to vote on various occasions, including those
that are authorized by the Articles, the By-Laws, or by virtue of any law, and
further provides that on any matter submitted to a vote of the shareholders, all
shares shall be
<PAGE>
voted by each class of shares, except that (i) when required by the Investment
Company Act of 1940, shares shall be voted in the aggregate and not by each
particular class of shares, and (ii) when the Trustees have determined that a
matter affects only the interests of one or more classes of shares, than only
the shareholders of such classes of shares will be entitled to vote thereon. We
have noted that certain other provisions that are contained in other articles of
the Articles and in the By-Laws refer to a majority shareholder vote without
reference to a separate vote by classes of shares. You have stated, and we are
relying upon such statement, that the legal effect of any of such provisions is
limited by, and subject to, the provisions discussed above that appear in
Article VIII, section 1, of the Articles.
In the case of meetings, Article VIII, section 2, of the Articles
provides that a special meeting of the shareholders of any class of shares may
be called by the holders of one-tenth of the outstanding shares of the class
entitled to vote. With respect to quorums, it is provided in Article VIII,
section 3, of the Articles that a majority of shares of the Trust outstanding
and entitled to vote shall constitute a quorum, except that where the Articles
or any provision of law permit or require that holders of any class of shares
shall vote as a class, then a majority of the aggregate number of shares of that
class entitled to vote shall be necessary to constitute a quorum for the
transaction of business by that class of shares. In the case of amendments to
the Articles, it is provided in Article XII, section 7, of the Articles, that a
vote of a majority of the shares of the Trust is generally required, except that
where an amendment affects that shareholders of one or more classes of shares,
but not the shareholders of all outstanding classes of shares, the amendment
shall be authorized by a vote of the shareholders holding a majority of the
shares entitled to vote of each class affected, and not vote of shareholders of
a class of shares not affect shall be required.
Other provisions of the Articles deal with rights to indemnity. Article
XI, section 2, of the Articles provides that a Trustee may be indemnified by the
appropriate class of shares of the Trust, and that expenses of a trustee related
to such indemnity may be paid by the appropriate class of shares. Similarly,
Article XI, section 3, of the Articles provides that if a shareholder is held
liable solely by reason of his being or having been a shareholder, he may be
entitled to be indemnified out of the assets belonging to the appropriate class
of shares. With respect to reimbursement of Trustee expenses, Article VI,
section 1, of the Articles provides that a Trustee shall be reimbursed from the
assets belonging to the appropriate class of shares.
As described above, it is the intention of the Trust that each class be
treated separately from the others, and that the income, gains, and losses that
relate to a particular class of shares be allocated to that class alone. We have
been informed that the Trusts will attempt to invest the bulk of the assets
belonging to the Minnesota Class of Shares in any combination of tax-exempt
<PAGE>
obligations of the State of Minnesota, its political or governmental
subdivisions, its municipalities, and its governmental agencies of
instrumentalities, so as to generate as large a percentage of tax-exempt income
a is possible. Accordingly, except during defensive periods or when acceptable
investments are unavailable to the Minnesota Class of Shares, the Trust
anticipates that it will maintain at least 80% of its assets belonging to that
class in debt obligations which are exempt from the regular Federal income tax
and, in the case of non-corporate shareholders, are exempt from the regular
Minnesota income tax.
As indicated above, we have been told that, for federal income tax
purposes, the Trust intends to qualify so as to be eligible to pay
exempt-interest dividends, as defined in section 852(b)(5)(A) of the Code, to
its shareholders, and that pursuant to section 852(b)(5)(B) of the Code, such
exempt-interest dividends shall be treated by the shareholders as an item of
interest that is excludable from gross income under section 103(a) of the Code.
Accordingly, we have been informed that, to the extent that a distribution to
the non-corporate shareholders of the Minnesota Class of Shares constitutes an
exempt-interest dividend, such shareholders will not pay regular federal income
tax with respect to such amounts, and such amounts will not be part of their
federal adjusted gross income or regular federal taxable income.
For Minnesota income tax purposes, it is provided in Minn. Stat.
ss.290.01, subd, 20, that in the case of individuals, estates and trusts, the
starting point for the computation of Minnesota taxable income is gross income,
and gross income is defined as federal adjusted gross income, subject to various
modifications. Pursuant to paragraph (4) of Minn. Stat. ss.290.01, subd. 20(a),
it is further provided that the following shall be added to federal adjusted
gross income:
"Exempt-interest dividends, as defined in section 852(b)(5)(A) of the
internal Revenue Code of 1954, not included in federal adjusted gross
income pursuant to section 852(b)(5)(B) of the internal revenue code of
954, except for that portion of exempt-interest dividends derived from
interest income on obligations of the State of Minnesota, any of its
political or governmental subdivisions, any of its municipalities, or
any of its governmental agencies or instrumentalities;.."
Accordingly, to the extent that the exempt-interest dividends for federal
purposes are "derived" from interest income on obligations of the State of
Minnesota and its specified subdivisions, municipalities, agencies and
instrumentalities, the exempt-interest dividends will likewise be exempt from
the regular Minnesota income tax, and only those exempt-interest dividends which
are derived from other sources will be added to federal adjusted gross income
and subjected to the regular Minnesota income tax, in the case of individuals,
estates, and trusts. In this regard, it should be noted that interest income
that is derived from obligations held
<PAGE>
through repurchase agreements, even though derived from Minnesota obligations
the interest income from which would be exempt, will not qualify under these
rules, and any exempt interests dividends that are attributable to such interest
will be added to federal adjusted gross income and be subjected to the regular
Minnesota income tax in the case of individuals, estates, and trusts.
While there is no Minnesota authority directly in point, we believe
that pursuant to the above provision of the Minnesota statutes, and the facts as
we have described them, the exempt-interest dividends that will be received with
respect to the Minnesota Class of Shares by individuals, estates, and trusts
that are holders thereof, will be derived from the Minnesota obligations
specified above, to the extent that such specified obligations represent the
obligations of the Minnesota Class of Shares that have generated the
exempt-interest dividends. Hence, such exempt-interest dividends should be
exempt from the regular Minnesota income tax with respect to such shareholders.
To the extent that other investments of the Minnesota Class of Shares generate
exempt-interest dividends as defined in section 852(b)(5)(A) of the Code that
are not derived from the Minnesota obligations referred to above, such
exempt-interest dividends will be required to be taken into account in
determining the regular Minnesota taxable income of an individual, estate, or
trust. In addition, other income attributable to other sources, including long
and short-term capital gain, that is received by an individual, estate or trust
with respect to the shares of the Minnesota Class of Shares will not e exempt
from the regular Minnesota income tax, Finally, in the case of a corporation
that is subject to the Minnesota excise tax on corporations that is measured by
taxable net income, not even exempt-interest dividends that are attributable to
the specified Minnesota obligations will be exempt from Minnesota tax.
Our conclusions that are stated above are based on the current
provisions of the Minnesota statutes and such other authorities and
interpretations as we have deemed appropriate, all of which, of course, are
subject to change or revision, and the facts and assumptions that we have stated
herein. Moreover, as previously indicated, we note that in reaching he
conclusion that exempt-interest dividends will be exempt from the regular
Minnesota income tax when received with respect to the Minnesota Class of Shares
by holders thereof who are individuals, estates and trusts, to the extent such
exempt-interest dividends are derived from the specified Minnesota obligations
described above, we are not aware of any Minnesota statute, regulation or case
which describes when income from one trust, with many classes of shares, is
treated as being derived from the assets that are deemed attributable to a
particular class of shares pursuant to the provisions of the Declaration of
Trust of the particular trust. However, we are also familiar with the fact that
the Minnesota Department of Revenue has issued a ruling in which it recognized
that provisions similar to those described herein were sufficient to treat the
income from one series of a regulated investment company as belonging
exclusively to the shareholders who owned the outstanding shares of that
<PAGE>
series. While not binding on the State of Minnesota, this ruling is nonetheless
informative. Finally, we are aware that under the recently enacted federal Tax
Reform Act of 1986, a new subsection has been added to section 851 of the Code
that provides that where a regulated investment company has more than on fund,
each fund shall be treated as a separate corporation, except for the
definitional requirement of section 851 (a) of the Code. A "fund" is defined in
the new provision as a "segregated portfolio of assets, the beneficial interests
of which are owned by the holders of a class or series of stock of the regulated
investment company that is preferred over all other classes or series in respect
of such portfolio of assets." This provision is effective, for federal purposes,
for taxable years beginning after October 22, 1986, the date of the law's
enactment. If the State of Minnesota adopts this rule, this will confirm the
conclusion reached in this letter as to the application of the regular Minnesota
income tax to exempt interest dividends that are received by shareholders of the
Minnesota class of Shares who are individuals, estates, or trusts.
Apart from its regular income tax, Minnesota imposes an alternative
minimum tax (see Minn. Stat. ss.290.091) in the case of individuals, estates,
and trusts. This tax is based, in part, on such taxpayers' federal tax
preference items. The federal Tax Reform Act of 1986 provides, effective for
taxable years beginning after December 31, 1986, that interest on specified
private activity bonds will be a federal tax preference item, and that an exempt
interest dividend of a regulated investment company will constitute a federal
tax preference item to the extent of its proportionate share of the interest on
such private activity bonds. Accordingly, if Minnesota continues to impose an
alternative minimum tax that is based on federal tax preference items, and if no
exception is made for interest on specified private activity bonds and exempt
interest dividends attributable thereto, then for taxable year beginning after
December 31, 1986, holders of the Minnesota Class of Shares who are individuals,
estates, or trusts may be subject to the Minnesota alternative minimum tax as a
result of the receipt of exempt interest dividends that are attributable to such
private activity bond interest, even though they are also attributable to the
Minnesota sources that would permit such exempt interest dividends to be exempt
from the regular Minnesota income tax. In addition, as a result of legislation
enacted in 1986 by the Minnesota legislature, the entire portion of exempt
interest dividends that is attributable to sources other than such Minnesota
sources, and that is received by holders of the Minnesota Class of Shares who
are individuals, estates or trusts, is subject to the Minnesota alternative
minimum tax, effective for taxable years beginning after December 31, 1985.
We hereby consent to the filing of this opinion as an exhibit to the
registration statement to be filed on November 17, 1986, with the Securities and
Exchange Commission, and to the reference to us under the heading "Minnesota"
that deals with Minnesota taxes.
<PAGE>
In giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/ Faegre & Benson
FAEGRE & BENSON
LAW OFFICES
SHOOK, HARDY & BACON P.C.
ONE KANSAS CITY PLACE
1200 MAIN STREET
KANSAS CITY, MISSOURI 64105-2118
(816)474-6550
April 8, 1993
First Investors Multi-State Insured
Tax Free Fund
95 Wall Street
New York, New York 10005
RE: FIRST INVESTORS MULTI-STATE INSURED TAX FREE FUND-
MISSOURI SERIES
Gentlemen:
We have acted as Missouri tax counsel for the First Investors
Multi-State Insured Tax Free Fund (the "Fund"), which was organized as a
Massachusetts business trust on October 30, 1985. The Fund offers several state
series, one of which will be the First Investors Missouri Insured Tax Free
Series (the "Missouri Series").
We understand that the Missouri Series will invest at least 80% of its
assets in a portfolio of debt obligations issued by the State of Missouri, its
municipal governments or public authorities ("Missouri Obligations"), or by
territories or possessions of the United States, the interest on which is exempt
from federal income taxation and from income taxation by the State of Missouri
and its municipal governments and public authorities. Although the objective of
the Missouri Series is to provide income that is exempt from federal, state and
local income taxation for residents of Missouri, the fund may invest up to 20%
of the assets of the Missouri Series in debt obligations the interest on which
is subject to taxation by the United States and/or the State of Missouri, its
municipal governments and public authorities.
You have advised us that the Missouri Series intends to qualify as a
"regulated investment company," as such term is defined in Section 851 of the
Internal Revenue code of 1986, as amended (the "Code"). We specifically refrain
from expressing any opinion as to whether the Missouri Series will qualify as a
regulated investment company under Part I of Subchapter M of the Code, and we
have not been furnished with any Internal Revenue
<PAGE>
Service ruling letter or opinion of counsel as to the status of the Missouri
Series as a regulated investment company.
In rendering this opinion, we have assumed the following:
(1) That the Missouri Series will qualify as a "regulated
investment company," as such term is defined in Section 851 of the Code;
(2) That dividends paid by the Missouri Series and designated
as "exempt-interest dividends" as required by Section 852(b)(5) of the Code will
qualify as interest excludable from a shareholder's gross income for federal
income tax purposes under Section 103 of the Code;
(3) That dividend distributions by the Missouri Series
attributable to net short-term capital gain realized by the Missouri Series will
be taxed at the rates that apply to ordinary income for federal income tax
purposes;
(4) That dividend distributions by the Missouri Series
attributable to "net capital gain" (as such term is used in Section 852(b) of
the Code) realized by the Missouri Series will be taxable to the recipient
shareholder as long-term capital gain for federal income tax purposes;
(5) That dividends paid by the Missouri Series and
attributable to interest earned on obligations of the United States will be
includible in a shareholder's adjusted gross income for federal income tax
purposes;
(6) That the Missouri Series will notify its shareholders
within 60 days after the close of its taxable year as to the amount of dividends
exempted from taxation by the State of Missouri;
Our analysis of Missouri law, as it relates to shareholders of
the Missouri Series, is set forth below:
I. Application of Missouri State Income Tax
Under Mo. Rev. Stat. ss. 143.121, the Missouri adjusted
gross income of an individual is the individual's federal adjusted gross income,
subject to certain modifications. Similarly, under Mo. Rev. Stat. ss.ss. 143.341
and 143.351, the Missouri taxable income of an estate or trust is the estate or
trust's federal taxable income, subject to certain modifications. Finally, under
Mo. Rev. Stat. ss. 143.431, the Missouri taxable income of a corporation is so
much of its federal taxable income (subject to certain modifications) as is
derived from sources within Missouri. Under these provisions, exempt-interest
<PAGE>
dividends paid by the Missouri Series and excludable from the federal adjusted
gross income of a shareholder under Sections 852(b)(5) and 103 of the Code are
exempt from income taxation by the State of Missouri absent a specific
modification provision to the contrary.
A. Dividends attributable to interest on Missouri Obligations.
Exempt-interest dividends paid by the Missouri Series and attributable to
interest earned by the Missouri Series on Missouri Obligations are not an
addition to the shareholder's federal adjusted gross income and are, therefore,
exempt from Missouri income taxation. Specifically, regulations promulgated by
the Missouri Department of Revenue (the "Regulations") state that a regulated
investment company may designate federal exempt-interest dividends attributable
to interest earned on obligations of the State of Missouri and its political
subdivisions as dividends that need not be included in the shareholder's
Missouri taxable income. Mo. Code Regs. Title 12, ss. 10-2.155(4).
B. Dividends attributable to interests on obligations of other
states. To compute Missouri income for individuals, trusts and corporations,
interest on obligations of other states (or their political subdivisions)
excluded from federal adjusted gross income under Section 103 of the Code is
added to federal adjusted gross income. Mo Rev. Stat. ss. 143.121.2(a); Mo. Rev
Stat. ss. 143.341.3; Mo. Rev. Stat. ss. 143.351.2; Mo. Rev. Stat. ss. 143.431.2.
Consistent with the foregoing, the Regulations provide that exempt-interest
dividends attributable to interest on obligations of states other than Missouri
(or the political subdivisions of such states) are includible in the
shareholder's Missouri taxable income. Mo. Code Regs. Title 12, ss. 10-2.155(4).
C. Dividends attributable to interest on obligations of
territories or possessions of the United States. Interest on obligations of
territories or possessions of the United States excluded from federal adjusted
gross income under Section 103 of the Code is added to federal adjusted gross
income to compute Missouri income, unless exempted from Missouri income taxation
by federal law. Mo. Rev. Stat. ss. 143.121.2(b). Under this authority, the
Regulations provide that a regulated investment company may designate federal
exempt-interest dividends attributable to interest earned on obligations of
territories and possessions of the United States as dividends which need not be
included in the shareholder's Missouri taxable income, provided the interest on
such obligations is exempted from Missouri taxation by federal law. Mo. Code
Regs. Title 12, ss. 10-2.155(4). All bonds issued by Puerto Rico (or by its
authority), the Virgin Islands (or any municipality thereof), or Guam (or by its
authority) are exempt from state taxation. 48 U.S.C. ss.ss. 745, 1403 and 1423a.
Accordingly, exempt-interest dividends attributable to interest earned on
obligations issued by Puerto Rico (or by its authority), the Virgin Islands (or
any municipality thereof), or Guam (or by its authority) are exempt
<PAGE>
from taxation by the State of Missouri because such dividends are not required
to be added back to the shareholder's federal adjusted gross income pursuant to
Mo. Rev. Stat. ss. 143.121.2(b).
D. Dividends attributable to interest on obligations of the
United States. A taxpayer subject to the Missouri income tax is entitled to
subtract from federal adjusted gross income interest on obligations of the
United States. Mo. Rev. Stat. ss. 143.121.3(a). The Regulations provide that
this reduction of federal adjusted gross income applies also to any dividend
paid by a regulated investment company that is attributable to interest earned
on obligations of the United States and is designated by the regulated
investment company as a state income tax exempt-interest dividend in a written
notice mailed to its shareholders not later than 60 days after the close of its
taxable year (a "U.S. Dividend"). Mo. Code Regs. Title 12, ss. 10-2.155(2). This
written notice must state the amount of interest paid or expense incurred by the
regulated investment company in the production of the U.S. Dividends. Id.
The Regulations also state that the amount of the reduction of
federal adjusted gross income for each shareholder is equal to the amount of the
shareholder's U.S. Dividends reduced by (1) interest paid or expense incurred to
produce such dividends, to the extent the interest paid or expense incurred
exceeds $500 and (2) the federal corporate dividend received deduction, if any,
attributable to such dividends. Mo. Code Regs. Title 12, ss. 10-2.155(2). the
Missouri Department of Revenue has indicated, however, that the provisions
relating to interest and other expenses do not apply if the aggregate amount
designated as a U.S. Dividend by the regulated investment company does not
exceed the amount of interest received by the regulated investment company on
obligations of the United States less the amount of interest and other expenses
incurred by the regulated investment company to produce such interest.
In order to qualify for the reduction of federal adjusted
gross income discussed above, a shareholder is required to attach to his/her
Missouri income tax return a copy of a year-end statement received from the
regulated investment company either (a) identifying (by issuer) all obligations
of the United States held by the regulated investment company or (b) indicating
the percentage of dividends paid by the regulated investment company that are
attributable to interest on obligations of the United States. Mo. Code Regs.
Title 12, ss. 10-2.155(3).
E. Dividends attributable to gain from the sale of obligations. In
computing a shareholder's Missouri taxable income, Missouri law does not provide
an exclusion for dividend distributions from a regulated investment company that
are attributable to gain realized by such company on the sale or
<PAGE>
exchange of exempt obligations. Thus, such distributions will be included in a
shareholder's federal adjusted gross income and subject to tax for Missouri
income tax purposes.
F. Gain from the sale of shares of the Missouri Series. Similarly, gain
realized by a shareholder from the sale or other disposition of his shares of
the Missouri Series will be included in a shareholder's federal adjusted gross
income and thus subject to tax for Missouri income tax purposes.
II. Application of City Earnings and Profits Tax
Missouri law authorizes the cities of St. Louis, Kansas City
and St. Joseph to impose an earnings and profits tax (the "City Tax") on
individuals and on certain corporations, associations, businesses and other
activities. Mo. Rev. Stat. ss. 92.110; Mo. Rev. Stat. ss. 92.210. The enabling
statutes provide that interest on Missouri Obligations, or on obligations of the
United States or its possessions, is exempt from the City Tax. Mo. Rev. Stat.
ss. 92.130.2(5); Mo. Rev. Stat. ss. 92.220.2(5). The taxing authorities in the
cities of St. Louis and Kansas City take the position that the portion of each
dividend paid by a regulated investment company, or on obligations of the United
States or its possessions, is exempt from the City Tax. St. Joseph has not yet
implemented a City Tax.
A. Certain individual taxpayers. With respect to individuals who
are not engaged in a trade or business, the City Tax applies only to salaries,
wages, commissions and other compensation. Mo. Rev. Stat. ss. 92.110; Mo. Rev.
Stat. ss. 92.210. Thus, all dividends received by such individual shareholders
of the Missouri Series should not be subject to the City Tax.
B. Business taxpayers. With respect to taxpayers other than the
individuals described above ("Business Taxpayers"), the City Tax of Kansas City
(the "Kansas City Tax") applies only to income arising from activities in the
regular course of the taxpayer's trade or business. Mo. Rev. Stat. ss. 92.210.
Thus, if a Business Taxpayer holds shares of the Missouri Series for investment
purposes and not as part of its ordinary trade or business, the dividends
received by such Business Taxpayer from the Missouri Series should not be
subject to the Kansas City Tax. However, if a Business Taxpayer holds shares of
the Missouri Series as part of its ordinary trade or business, dividends
received by such taxpayer should be subject to the Kansas City Tax to the extent
such dividends are not attributable to interest earned on Missouri Obligations,
or on obligations of the United States or its possessions.
In general, the City Tax of St. Louis (the "St. Louis Tax")
applies to Business Taxpayers in the same manner as the Kansas City Tax. Mo.
Rev. Stat. ss. 92.110. However, in the case of a partnership or corporation
having its business domicile in
<PAGE>
St. Louis, the taxing authorities in St. Louis take the position that all income
recognized by such partnership or corporation arises in the regular course of
the taxpayer's trade or business.
Based upon and subject to the foregoing, we are of the opinion
that, under existing law:
1. If a dividend paid by the Missouri Series qualifies as an
exempt-interest dividend under Section 852(b)(5) of the Code, the portion of
such exempt-interest dividend that is attributable to interest received by the
Missouri Series on Missouri Obligations, or on obligations of territories or
possessions of the United States (to the extent federal law exempts interest on
such obligations from state taxation), will not be subject to the Missouri
income tax when received by a shareholder of the Missouri Series, provided the
Missouri Series properly designates such portion as an exempt dividend (a
"Missouri Dividend" ) under Missouri law.
2. Dividends paid by the Missouri Series that are attributable to interest
received by the Missouri Series on obligations of the United States will not be
subject to the Missouri income tax when received by a shareholder of the
Missouri Series, provided (i) the Missouri Series sends a written notice to the
shareholder within 60 days after the close of its taxable year which
specifically designates as "state income tax exempt-interest dividends" those
dividends attributable to interest earnd on obligations of the United States;
(ii) the notice referred to in clause (i) specifies the amount of interest paid
or expense incurred by the Missouri Series in the production of such "state
income tax exempt-interest dividends" and indicates the percentage of dividends
paid by the Missouri Series that are attributable to interest earned on
obligations of the United States; (iii) the amount of dividends designated as
"state income tax exempt-interest dividends" by the Missouri Series does not
exceed the amount of interest received by the Missouri Series on obligations of
the United States less the amount of interest and other expense incurred by the
Missouri Series to produce such interest; and (iv) the shareholder attaches to
his/her Missouri income tax return a summary document indicating the percentage
of dividends paid by the Missouri Series that are attributable to interest
earned on obligations of the United States.
3. Except as provided in Paragraphs 1 and 2 above, the State
of Missouri has no special exemption provisions, for (i) dividends received by
shareholders of a regulated investment company or (ii) capital gains realized by
shareholders of a regulated investment company upon the sale or exchange of
shares of such company. Thus, in the case of shareholders who are subject to the
Missouri income tax and who, under applicable law, are required to include
capital gain, dividend and interest
<PAGE>
income in their Missouri taxable income, all dividends (except Missouri
Dividends and dividends properly designated as "state income tax exempt-interest
dividends" under Missouri law) paid by the Missouri Series to such shareholders,
and all gains realized by such shareholders on the redemption or sale of shares
of the Missouri Series, will be subject to the Missouri income tax.
4. Except as set forth in paragraph (a) below, dividends
received by (i) an individual shareholder of the Missouri Series who is not
engaged in a trade or business, or (ii) a Business Taxpayer who holds shares of
the Missouri Series for investment purposes and not as part of its ordinary
trade or business, will not be subject to the City Tax. With respect to
dividends received by a Business Taxpayer who holds shares as part of its
ordinary trade or business, each dividend (or portion thereof) paid by the
Missouri Series that is attributable to interest earned on Missouri Obligations,
or on obligations of the United States or its possessions, will not be subject
to the City Tax; however, except as set forth in paragraph (b) below, other
dividends received by such Business Taxpayer will be subject to the applicable
City Tax, to the extent such Business Taxpayer is otherwise subject to such tax.
(a) The taxing authorities in St. Louis take the
position that all of the assets of a partnership or corporation having its
business domicile in St. Louis should be treated as held as part of such
entity's ordinary trade or business. Under this position, dividends received on
shares of the Missouri Series held by such partnership or corporation, whether
or not held for investment purposes, could be subject to the St. Louis Tax.
There is no express authority for this position, and a taxpayer could take the
position that dividends received by any corporation or partnership that holds
shares of the Missouri Series for investment purposes ("Investment Dividends")
should not be subject to the St. Louis Tax. Therefore, we specifically refrain
from expressing an opinion as to whether Investment Dividends received by a
partnership or corporation having its business domicile in St. Louis (to the
extent such Investment Dividends are not attributable to interest earned on
Missouri Obligations, or on obligations of the United States or its possessions)
are subject to St. Louis Tax.
(b) The enabling statutes for the City Tax do
not indicate whether obligations of territories (as opposed to possessions) of
the United States are exempt from the City Tax. Therefore, we specifically
refrain from expressing an opinion as to whether dividends attributable to
interest earned on obligations of territories of the United States are exempt
from the City Tax.
We have not examined any of the obligations to be acquired by
the Missouri Series and express no opinion as to whether such obligations, or
the interest thereon, are in fact
<PAGE>
exempt from any federal or Missouri taxes.
This opinion is furnished to you specifically in connection
with the Missouri Series and solely for your information and benefit. It may not
be relied on by you in any other connection, and it may not be relied on by any
other person for any purpose.
We do not express an opinion as to any matters governed by the
laws of any jurisdiction other than the State of Missouri. No expansion of our
opinion may be made by implication or otherwise. We express no opinion other
than as herein expressly set forth. We do not undertake to advise you of any
matter within the scope of this letter that comes to our attention after the
date of this letter, and we disclaim any responsibility to advise you of any
future changes in law or fact that may affect the above opinion.
We hereby consent to the filing of this opinion as an exhibit
to the Post-Effective Amendment No. 14 to the Fund's Registration Statement on
Form N-1A and to the reference to our firm in such Registration Statement and
the prospectus included therein.
Very truly yours,
/s/ SHOOK, HARDY & BACON P.C.
SHOOK, HARDY & BACON P.C.
WYRICK, ROBBINS, YATES & PONTON L.L.P.
ATTORNEYS AT LAW
THE SUMMIT
4101 LAKE BOONE TRAIL, SUITE 300
RALEIGH, NORTH CAROLINA 27607-7506
MAILING ADDRESS
POST OFFICE DRAWER 17803
RALEIGH, NORTH CAROLINA 27619
April 19, 1994
First Investors Multi-State Insured
Tax Free Fund--North Carolina Series
95 Wall Street
New York, New York 10005
Re: First Investors Multi-State Insured
Tax Free Fund - North Carolina Series
Gentlemen:
We have acted as your special North Carolina tax counsel in connection
with the First Investors Multi-State Insured Tax Free Fund (the "Fund") and the
First Investors North Carolina Insured Tax Free Series (the "North Carolina
Series") established as a part of the Fund.
You have requested our opinion regarding (a) the taxability of
distributions from the North Carolina Series for purposes of the North Carolina
Individual Income Tax (in the case of individuals) and the North Carolina
Corporation Income Tax (in the case of corporations), (b) the taxability of gain
upon the disposition of shares of the North Carolina Series and (c) the
taxability of property held be the North Carolina Series for purposes of the
North Carolina Intangible Personal Property Tax.
In furnishing this opinion, we have examined the prospectus for the
Fund (the "Prospectus") and the Statement of Additional Information (the
"Statement"), each relating to the North Carolina Series and certain other
series of the Fund; we have reviewed and considered the provisions of applicable
law as set forth in Chapter 105 of the General Statutes of North Carolina,
particularly those of Subchapter I, Article 4, Schedule D, Division I
(Corporation Income Tax), Subchapter I, Article 4, Schedule D, Division II
(Individual Income Tax), and Subchapter I, Article 7, Schedule H (Intangible
Personal Property), and regulations, income tax bulletins and information
releases promulgated by the North Carolina Department of Revenue
<PAGE>
thereunder; and we have reviewed and considered applicable opinions rendered by
the office of the Attorney General of North Carolina with regard to the
foregoing. In addition, we have requested and received statements of
administrative position from the Individual Income Tax Division of the North
Carolina Department of Revenue and from the Intangibles Tax Section of the
Property Tax Division of the North Carolina Department of Revenue, and our
opinion is based in part on such statements of administrative position.
We have assumed for purposes of this opinion that the North Carolina
Series intends to qualify and will continue to be qualified as a regulated
investment company as defined in Section 851 of the Internal Revenue Code of
1986, as amended (the "Code"), eligible to pay and intending to distribute
"Exempt Interest Dividends" as provided in Section 852(b)(5) of the Code. We
have also assumed that the Fund and the North Carolina Series will be operated
in the manner described in the Prospectus and the Statement.
Based on the foregoing, it is our opinion under existing North Carolina
law that:
(1) Shareholders of the North Carolina Series who are otherwise subject
to the North Carolina individual or corporate income tax will not be subject to
either such tax on North Carolina Series distributions to the extent that such
distributions qualify as Exempt Interest Dividends under the Code and represent
(a) interest on direct obligations of the United States or its possessions
(i.e., generally excluding obligations merely backed or guaranteed by the United
States government), obligations of the State of North Carolina or its political
subdivisions, or obligations of nonprofit educational institutions organized or
chartered under the laws of the State of North Carolina, or (b) interest upon
obligations, and gain from the disposition of obligations, if the North Carolina
law under which the obligations were issued specifically exempts the interest or
gain from such taxes (collectively, "North Carolina Exempt Obligations"),
subject to the requirement set forth in clause (3) below. A list of certain
federal and North Carolina obligations which qualify as North Carolina Exempt
Obligations is attach hereto as Exhibit A and incorporated herein by reference.
(2) A shareholder of the North Carolina Series who is otherwise subject
to North Carolina income tax will generally recognize capital gain for North
Carolina income tax purposes to the same extent as a shareholder would for
federal income tax purposes when the North Carolina Series makes a capital gain
distribution or a shareholder disposes of shares. However, North Carolina Series
capital gain distributions which are attributable to debt obligations expressly
exempt from tax on gain under North Carolina law are exempt from North Carolina
income taxation, subject to the requirement set forth in clause (3).
<PAGE>
(3) In the absence of a supporting statement from the North Carolina
Series setting forth amounts received which represent distributions attributable
to North Carolina Exempt Obligations, the total amount designated as exempt from
tax is fully subject to North Carolina income tax.
(4) Distributions by the North Carolina Series of interest on federal
obligations will not be treated as dividends for purposes of the six percent
dividend tax credit which might otherwise be available to individual
shareholders because such interest is treated as flowing through to the
shareholders.
(5) Shareholders of the North Carolina Series, who are otherwise
subject to the North Carolina intangible personal property tax on the fair
market value of shares of stock and mutual funds held on December 31 of each
year, will not be subject to such tax thereon to the extent that the share value
of the North Carolina Series is reduced by a percentage equal to the ratio of
direct obligations of the United States government and direct obligations of the
State of North Carolina and its political subdivisions to the total investments
held by the North Carolina Series as of December 31 of each year. Such direct
obligations generally include all North Carolina Exempt Obligations. Upon
request, however, a shareholder must be able to provide information to support
any percentage reduction in share value and thus sustain any deduction claimed.
(6) Indebtedness owed to a broker, bank or other party incurred to
purchase shares of the North Carolina Series as listed on the intangible tax
return may be deducted from the taxable value of such shares owned (as
determined pursuant to (5) above), subject to the following requirements and
limitations: the indebtedness must be incurred directly to purchase the shares
of the North Carolina Series; the shares purchased with proceeds of the
indebtedness must be pledged as collateral; the amount of indebtedness allowable
is limited to the same percentage that the taxable value of the shares of the
North Carolina Series purchased with the borrowed money (as determined pursuant
to (5) above relates to the total value of such shares; the amount of allowable
indebtedness may not exceed the taxable value of the shares of the North
Carolina Series purchased with proceeds of the indebtedness; and information
supporting a claim of allowable indebtedness must be furnished upon request.
The North Carolina tax disclosure relating to the North Carolina Series
appearing in the Prospectus under the heading "Taxes--State Income Taxes--North
Carolina," the information in the Prospectus designated as "Investment
Objectives and Policies -- State Specific Risk Factors -- Risk Factors for the
North Carolina Series," and the information in the Statement designated as
"State Specific Rick Factors -- Risk Factors for the North Carolina Series," all
having been prepared by us for inclusion therein, are accurate as of the date
hereof. We express no opinion as to the accuracy or adequacy of any other
information in the Prospectus or the Statement.
<PAGE>
We consent to the inclusion of this opinion as an exhibit to
Post-Effective Amendment No. 15 to the Fund's Registration Statement on Form
N-1A as filed with the Securities and Exchange Commission ("Post-Effective
Amendment No. 15") and the applications and registration statements filed in
accordance with the securities laws of the several states in which shares of the
North Carolina Series are to be offered. We further consent to the use of our
name and the references to our firm in Post-Effective Amendment No. 15 and the
related Prospectus and the reference in the Prospectus to the fact that this
opinion has been rendered.
Very truly yours,
/s/Wyrick, Robbins, Yates & Ponton L.L.P.
<PAGE>
EXHIBIT A
The Revenue Department considers net interest from obligations issued
under the borrowing power of the following entities to be interest from direct
obligations of the United States or its possessions and thus exempt from North
Carolina income tax: Puerto Rico, the Virgin Islands and Guam; Federal Land
Banks; Federal Home Loan Banks; Federal Intermediate Credit Banks; Farm Home
Administration; Export-Import Bank of the United States; Tennessee Valley
Authority; Banks for Cooperatives; U.S. Treasury bonds, notes, bills,
certificates and savings bonds; Student Loan Marketing Association; Production
Credit Association; Federal Farm Credit Bank; Federal Financing Bank; Federal
Savings and Loan Insurance Corporation; Federal Deposit Insurance Fund; United
States Postal Service; Resolution Funding Corporation; and Financing Corporation
(chartered by the Federal Housing Finance Board - 12 USCS 12-1441).
Examples of obligations on which interest and gain from disposition are
specifically exempted by statute include obligations issued under N.C.G.S.
131E-28 by the North Carolina Hospital Authorities; under N.C.G.S. 131A-21 by
the North Carolina Medical Care Commission under the Health Care Facilities
Finance Act; under N.C.G.S. 122A-19 by the North Carolina Housing Finance
Agency; under N.C.G.S. 159B-26 by the Joint Municipal Electric Power and Energy
Act; under N.C.G.S. 116-183 and 116-196 by the boards of trustees of State
supported colleges and universities in North Carolina; under N.C.G.S. 115E-21
under the provisions of the Higher Education Facilities Finance Acct by the
North Carolina Educational Facilities Finance Agency; and under N.C.G.S. 122D-14
by the North Carolina Agricultural Finance Authority; and under N.C.G.S.
63A-9(1) by the North Carolina Air Cargo Airport Authority.
Examples of obligations on which interest (but not gain from
disposition) are specifically exempted by statute include interest on bonds
issued by the North Carolina State Ports authority under N.C.G.S. 143B-456(g);
interest on any evidence of indebtedness issued by a North Carolina Housing
Authority under N.C.G.S. 157-26; interest on bonds issued by the authorities
created under the Industrial and Pollution Control Facilities Financing Act
under N.C.G.S. 159C-14; and income from securities, evidences of indebtedness,
and shares of capital stock issued by corporations organized to promote, develop
and advance the prosperity and economic welfare of the State of North Carolina
under N.C.G.S. 53A-15.
SQUIRE, SANDERS & DEMPSEY
Counsellors at Law
1800 Huntington Building
Cleveland, Ohio 44115
July 19, 1988
First Investors Multi-State Tax Free Fund
120 Wall Street
New York, New York 10005
Re: Ohio Taxes
Gentlemen:
You have requested our opinion as to the Ohio tax aspects of
the Ohio Series which is part of the First Investors Multi-State Tax Free Fund
(the "Fund"). The Fund is an open-end diversified management company organized
as a business trust under the laws of Massachusetts. The Fund's declaration of
trust authorizes the Trustees to establish one or more classes or series of an
unlimited number of shares, without par value, of the Trust, with each such
share representing an equal proportionate interest in the class with each other
share of the class outstanding. One class of shares in the Fund represent the
beneficial interest in the Ohio Series.
The Ohio Series will invest primarily in interest-bearing
obligations issued by or on behalf of the State of Ohio, political subdivisions
thereof and agencies and instrumentalities of the State or its political
subdivisions (the "Ohio Obligations"), and by the governments of Puerto Rico,
the Virgin Islands and Guam and their authorities or municipalities
("Territorial Obligations") (collectively, the "Obligations"). In the opinion of
bond counsel as to each issue of bonds in the Ohio Series, rendered on the date
of issuance, interest on such bonds is excluded from gross income for federal
income tax purposes under Section 103(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), or other provisions of federal law, provided that with
respect to certain Obligations, certain continuing covenants of the issuer or
other borrower are satisfied.
Dividends on the Ohio Series will be declared daily and, at
each shareholder's option, either reinvested in additional shares of the Ohio
Series on the last business day of the month, or paid in cash on the twentieth
day of the following month.
<PAGE>
You have advised us that the Fund and each series of the fund,
including the Ohio Series, intend to qualify as "regulated investment companies"
within the meaning of Section 851 of the Code and to pay "exempt-interest
dividends" within the meaning of Section 852(b)(5) of the Code, i.e., dividends
that are exempt from federal income tax in the hands of the Fund's shareholders.
We have assumed for the purposes of this opinion that at all times at least 50
percent of the value of the total assets of the Ohio Series will consist of Ohio
Obligations.
Based upon the foregoing and upon an examination of the
Prospectus and the Statement of Additional Information filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933 for the Fund and
such other documents and an investigation of such other matters of law as we
have deemed necessary, we are of the opinion that under existing law applicable
to shareholders of the Ohio Series:
1. The Ohio Series is not subject to the Ohio personal income
tax, the Ohio corporation franchise tax, or the Ohio dealers in intangibles tax.
2. Shareholders of the Ohio Series ("Shareholders") who are
otherwise subject to the Ohio personal income tax imposed on individuals and
estates will not be subject to such tax on distributions with respect to shares
of the Ohio Series to the extent that such distributions are attributable to
interest on Ohio Obligations and such distributions either (a) are received or
deemed received in a tax year of the Shareholder ending after June 30, 1988, or
(b) represent "exempt-interest dividends" for federal income tax purposes.
3. Shareholders who are otherwise subject to the Ohio
corporation franchise tax computed on the net income basis will not be subject
to such tax on distributions with respect to Shares of the Ohio Series to the
extent that such distributions either (a) are attributable to interest on Ohio
Obligations and are received or deemed received in a tax year of the Shareholder
ending after June 30, 1988, or (b) represent "exempt-interest dividends" for
federal income tax purposes. Shares of the Ohio Series will be included in a
Shareholder's tax base for purposes of computing the Ohio corporation franchise
tax on the net worth basis.
4. Shareholders who are otherwise subject to the Ohio personal
income tax imposed on individuals and estates or the Ohio corporation franchise
tax computed on the net income basis will not be subject to such taxes on
distributions of capital gains with respect to shares of the Ohio Series to the
extent that such distributions are attributable to profit made on the sale,
exchange or other disposition by the Ohio Series of Ohio Obligations and such
distributions are received or deemed received in a tax year of the Shareholder
ending after June 30, 1988.
<PAGE>
5. Distributions with respect to the Ohio Series that are
attributable to interest on obligations of the United States or its territories
or possessions or of any authority, commission, or instrumentality of the United
States that is exempt from state income taxes under the laws of the United
States (including the Territorial Obligations) is exempt from the Ohio personal
income tax and Ohio municipal income taxes and is excluded from the net income
base of the Ohio corporation franchise tax.
6. Except as stated in the next sentence, Ohio municipalities
may not impose income taxes on interest on or profit made on the sale of
intangible property, including Obligations. Municipalities that, pursuant to
local ordinance, taxed any type of intangible income on or before April 1, 1986,
may tax such intangible income that is distributed or deemed distributed in tax
years of Shareholders ending in 1988, and may continue to tax such intangible
income thereafter if approved by the electors of the municipality in an election
held on November 8, 1988; however, it is not clear that such municipalities may
tax interest on or profit made on the sale, exchange or other disposition of
Ohio Obligations that is distributed in tax years of Shareholders ending after
June 30, 1988.
7. In addition to the above exemptions, specific Ohio statutes
authorizing the issuance of certain Ohio Obligations generally provide that the
interest on and, in some cases, gain or profit from the sale or other
disposition of such Ohio Obligations are exempt from all taxation in the State.
Distributions with respect to shares of the Ohio Series attributable to interest
on and gain or profit from the sale or other disposition of obligations issued
pursuant to such statutes are exempt from the Ohio personal income tax and all
Ohio municipal income taxes (but not necessarily the net income base of the Ohio
corporation franchise tax).
8. Distributions with respect to the Ohio Series attributable
to proceeds of insurance paid to the Ohio Series that represent maturing or
matured interest on defaulted Obligations held by the Ohio Series will not be
subject to State or municipal income taxes if, and to the same extent as, such
interest would not have been subject to such taxes if paid in the normal course
by the issuer of such defaulted Obligations.
We have not examined any of the obligations to be acquired by
the Fund and express no opinion as to whether such obligations, interest thereon
or gain from the sale or other disposition thereof are in fact exempt from any
federal or Ohio taxes.
We hereby consent to the filing of this opinion as an exhibit
to the Post-Effective Amendment relating to the shares referred to above and to
the reference to our Firm as special Ohio tax counsel in said Amendment and in
the Prospectus contained therein.
Respectfully submitted,
/s/Squire, Sanders & Dempsey
WEISS, JENSEN, ELLIS & BOTTERI
A PROFESSIONAL CORPORATION
ATTORNEYS AT LAW
2300 U.S. BANCORP TOWER
111 S.W. FIFTH AVENUE
PORTLAND, OREGON 97204
February 13, 1992
First Investors Multi-State
Insured Tax Free Fund
95 Wall Street
New York, New York 10005
Re: First Investors Oregon Insured Tax Free Series ("Oregon
Series") - a Series of the First Investors Multi-State
Insured Tax Free Fund ("Multi-State Fund")
Ladies and Gentlemen:
You have requested our opinion regarding the taxability of certain
distributions from the Oregon Series for purposes of the Oregon personal income
tax in the case of individual investors and the Oregon corporate excise tax in
the case of corporate investors.
We understand the following:
a. The Oregon Series is one series of the Multi-State Fund.
b. The Multi-State Fund was organized as a Massachusetts business trust
on October 30, 1985 and is a diversified open-end management investment company.
c. The Oregon Series intends to qualify for treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code").
d. The Oregon Series intends to invest a sufficient portion of its
assets in a diversified portfolio of municipal instruments so that it will
qualify to pay "exempt-interest dividends" (within the meaning of Section
852(b)(5) of the Code) to investors holding shares in the Oregon Series
("Shareholders").
e. The municipal instruments held by the Oregon Series will include
obligations issued by or on behalf of the State of Oregon and municipal
governments and public authorities in the State of Oregon, as well as
obligations issued by territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies and
instrumentalities, if
<PAGE>
the interest on such obligations is statutorily exempt from federal income tax
and the Oregon personal income tax.
f. While the investment objective of the Oregon Series is to provide a
high level of interest income that is exempt from federal income tax and the
Oregon personal income tax, the Oregon Series may invest a portion of its assets
(not to exceed 20 percent) from time to time on a temporary basis in fixed
income assets that may be subject to federal income tax and the Oregon personal
income tax.
In rendering our opinion, we have assumed that dividends paid by the
Oregon Series and designated as exempt-interest dividends as required by Section
852(b)(5) of the Code will qualify as interest excludable from a Shareholder's
gross income for federal income tax purposes under Section 103 of the Code.
Based upon and subject to the foregoing, and subject to any
qualifications in the paragraphs below, we are of the opinion that under
existing law:
1. As long as the Oregon Series qualifies as a "regulated investment
company" under the Code, and the dividend distribution is designated by the
Oregon Series as a "state exempt-interest dividend" (within the meaning of ORS
316.683(2)) in a written notice mailed to Shareholders not later than 60 days
after the close of the Oregon Series' taxable year, the portion of any
distribution from the Oregon Series that represents interest received by the
Oregon Series on obligations (a) of Oregon or its political subdivisions and
authorities, (b) of the United States government, or (c) of territories and
possessions of the United States or of any authority, commission, or
instrumentality of the United States (to the extent federal law exempts interest
on such obligations from state taxation) will be exempt from the Oregon personal
income tax when distributed to a Shareholder.
2. Oregon has no special exemption provision for capital gain dividends
(defined in Section 852(b)(3) of the Code and excluded from the definition of
exempt-interest dividends in Section 852(b)(5) of the Code) that would be
available to a Shareholder. Accordingly, capital gain dividends distributed by
the Oregon Series to a Shareholder will be subject to the Oregon personal income
tax.
3. If a Shareholder receives a state exempt-interest dividend from the
Oregon Series with respect to shares in the Oregon Series, and such shares are
held by the Shareholder for less than six months, a loss, if any, on the sale of
such shares will be disallowed for Oregon personal income tax purposes to the
extent of the amount of the state exempt-interest dividend distributed to the
Shareholder with respect to such shares.
4. A state exempt-interest dividend paid on shares of the Oregon Series
will be subject to the Oregon personal income tax
<PAGE>
to the extent deductible interest on indebtedness was incurred to carry such
shares.
5. Corporate Shareholders subject to the Oregon corporate excise
tax must include in income distributions with respect to shares of the Oregon
Series.
We have not examined any of the obligations of the Oregon Series and
express no opinion as to whether such obligations, interest thereon, or gain
from the sale or other disposition thereof are in fact exempt from the federal
income tax or the Oregon personal income tax.
This opinion is furnished to you specifically in connection with the
Oregon Series and it may not be relied upon by you in any other connection. This
opinion may not be assigned, used or quoted without our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to a
post-effective amendment to the Registration Statement on Form N-1A filed with
the Securities and Exchange Commission relating to the Multi-State Fund and to
the reference to our firm in such post-effective amendment to the Registration
Statement and in the Prospectus included therein. We undertake no responsibility
to update this opinion.
Very truly yours,
Weiss, Jensen, Ellis & Botteri
By: /s/ Mark A. von Bergen
Mark A. von Bergen
KIRKPATRICK & LOCKHART
1500 OLIVER BUILDING
PITTSBURGH, PENNSYLVANIA 15222-2312
April 7, 1994
Trustees of the First Investors
Multi-State Insured Tax Free Fund
95 Wall Street
New York, New York 10005
Re: First Investors Pennsylvania Insured Tax
Free Series ("Pennsylvania Series") - a Series
of the First Investors Multi-State Insured
Tax Free Fund ("Multi-State Fund")
Ladies and Gentlemen:
You have requested our opinion regarding (i) the taxability of
distributions from the Pennsylvania Series for purposes of the "Pennsylvania
personal income tax" (72 P.S. ss.ss. 7301 to 7361) and the "Pennsylvania
corporate net income tax" (72 P.S. ss.ss. 7401 to 7410), (ii) the taxability of
shares of the Pennsylvania Series for purposes of the "Pennsylvania county
personal property tax" (72 P.S. ss. 4821), the "School District of Pittsburgh
personal property tax" (enacted by resolution adopted by the Board of Public
Education of the School District of Pittsburgh) and the "City of Pittsburgh
personal property tax" (Chapter 261 of Pittsburgh Code), and (iii) the
taxability of distributions from the Pennsylvania Series for purposes of the
"School District of Philadelphia investment net income tax" (ss. 19-1804 of
Philadelphia Code).
We understand that the Pennsylvania Series is one series of
the Multi-State Fund, a business trust formed under the laws of the Commonwealth
of Massachusetts, and that the Pennsylvania Series is a "regulated investment
company" as defined in Section 851 of the Internal Revenue Code of 1986, as
amended (the "Code"), eligible to pay "Exempt-Interest Dividends" as provided in
Section 852(b)(5) of the Code. We also understand that the Pennsylvania Series
invests in, and intends to continue to invest in, obligations issued by the
Commonwealth of Pennsylvania, public authorities, commissions, boards or
agencies created by the Commonwealth of Pennsylvania, political subdivisions of
the Commonwealth of Pennsylvania or public authorities created by any such
political subdivisions and also obligations of the United States and certain
qualifying agencies, instrumentalities, territories and possessions of the
United States, the interest from which is statutorily free from state
<PAGE>
taxation in Pennsylvania under the laws of the Commonwealth or the United States
(collectively, "Exempt Obligations").
In furnishing this opinion, we have reviewed such provisions
of Pennsylvania law, and such provisions of Pittsburgh and Philadelphia law as
reported in standard compilations thereof, as we have deemed appropriate.
We have assumed for purposes of this opinion that (i) the
Pennsylvania Series will operate as a regulated investment company and that
earnings distributed by the Pennsylvania Series from its portfolio earnings will
constitute Exempt-Interest Dividends; (ii) the assets of the Pennsylvania Series
and of the Multi-State Fund will be held and managed outside of the Commonwealth
of Pennsylvania; (iii) a majority of the trustees of the Pennsylvania Series and
the Multi-State Fund will not be residents of or domiciled in the Commonwealth
of Pennsylvania; (iv) the Pennsylvania Series reports to its investors the
percentage of its income and gain that is attributable to Exempt Obligations and
the percentage of the Pennsylvania Series is and at all relevant times will be
registered under the Investment Company Act of 1940.
We have also relied on an opinion of the Pennsylvania
Department of Revenue rendered in connection with another matter in which the
Department of Revenue set forth its policy that: (i) a regulated investment
company is a separate entity and the characteristics of income received by a
regulated investment company, to the extent includable in its Pennsylvania
corporate taxable income, will not flow through to a corporate investor in the
regulated investment company, and (ii) Exempt-Interest Dividends, to the extent
excluded from federal taxable income, are also excluded from Pennsylvania
corporate taxable income.
We are opining herein only as to the laws of Pennsylvania as
in effect on the date hereof. Accordingly, we are not opining on, and we assume
no responsibility as to, the applicability to or effect on any of the matters
covered herein of any other laws or the laws of any other jurisdiction.
Based upon and subject to the foregoing, we are of the opinion
that:
1. Individual shareholders of the Pennsylvania Series who are
subject to the Pennsylvania personal income tax, as either residents or
nonresidents of the Commonwealth, (i) will not be subject to the Pennsylvania
personal income tax on distributions by the Pennsylvania Series of interest that
is attributable to Exempt Obligations, and (ii) will be subject to the
Pennsylvania personal income tax on distributions by the Pennsylvania Series of
gains that are attributable to Exempt Obligations issued after February 4, 1994.
<PAGE>
2. Corporate shareholders of the Pennsylvania Series who are
subject to the Pennsylvania corporate net income tax will not be subject to the
Pennsylvania corporate net income tax on distributions by the Pennsylvania
Series of interest that is attributable to Exempt Obligations, provided such
distributions constitute Exempt-Interest Dividends and are not included in such
shareholders' federal taxable income determined before net operating loss
carryovers and special deductions. Corporate shareholders of the Pennsylvania
Series who are subject to the Pennsylvania corporate net income tax will be
subject to the Pennsylvania corporate net income tax on distributions by the
Pennsylvania Series of gains that are attributable to Exempt Obligations issued
after February 4, 1994.
3. Shares of the Pennsylvania Series that are owned by
investors who are residents of the Commonwealth of Pennsylvania will not be
taxable for purposes of the Pennsylvania county personal property tax to the
extent that the Pennsylvania Series' portfolio consists of Exempt Obligations on
the annual assessment date. Nonresidents of the Commonwealth are not subject to
the Pennsylvania county personal property tax.
4. Shares of the Pennsylvania Series that are owned by
investors who are residents of the City of Pittsburgh or the School District of
Pittsburgh, or both, will not be taxable for purposes of the City of Pittsburgh
personal property tax, as the case may be, to the extent that the Pennsylvania
Series' portfolio consists of Exempt Obligations on the annual assessment date.
5. Interest attributable to Exempt Obligations will be exempt
from the School District of Philadelphia investment net income tax in the same
proportion as the Pennsylvania Series is invested in Exempt Obligations.
We point out that the tax treatment of distributions made
after February 4, 1994 by the Pennsylvania Series of gains attributable to
Exempt Obligations issued on or prior to February 4, 1994 (referred to herein as
"Existing Portfolio Gains") is not entirely free from doubt. A new Pennsylvania
law (Act 68 of 1993 signed on December 3, 1993; the "Act") exempts from
Pennsylvania personal income taxation and Pennsylvania corporate income taxation
all distributions by the Pennsylvania Series of interest attributable to Exempt
Obligations for taxable years beginning on or after January 1, 1993. The Act
also subjects to Pennsylvania personal income taxation and Pennsylvania
corporate income taxation all distributions by the Pennsylvania Series of gains
on Exempt Obligations issued after February 4, 1994.
We understand that, prior to February 4, 1994 the Pennsylvania
Series relied on a ruling from the Pennsylvania Department of Revenue to pass
through to its shareholders the tax-free character of gains attributable to
Exempt Obligations (the "Private Ruling"). As you know, reliance on the Private
Ruling was permissible only if the Pennsylvania Series agreed to
<PAGE>
certain restrictions described in the Private Ruling and set forth in the
Pennsylvania Series' governing instrument concerning investments in Exempt
Obligations. We understand that the Pennsylvania Series has abandoned those
investment restrictions as of February 4, 1994.
The Act taxes distributions of gains attributable to Exempt
Obligations issued after February 4, 1994. The Private Ruling in effect exempted
from taxation gains distributed on or prior to February 4, 1994. The tax
treatment of Existing Portfolio Gains (i.e., gains distributed after February 4,
1994 on Exempt obligations issued before February 4, 1994), however, is unclear
now that the Pennsylvania Series no longer abides by the investment restrictions
referred to in the Private Ruling. Under a conservative approach, Existing
Portfolio Gains would be subject to Pennsylvania personal income taxation and
Pennsylvania corporate income taxation, because the Pennsylvania Series may not
rely on the Private Ruling after February 4, 1994. Under a more liberal
approach, Existing Portfolio Gains, no matter when distributed, would not be
subject to Pennsylvania personal income taxation or Pennsylvania corporate
income taxation, because the Pennsylvania Series should be able to rely on the
Private Ruling with respect to its existing portfolio of assets as of February
4, 1994. If the Pennsylvania Series desires certainty regarding the tax
treatment of Existing Portfolio Gains, we recommend that the Pennsylvania Series
obtain a ruling from the Pennsylvania Department of Revenue.
Further, as discussed above, the Act subjects gains on U.S.
obligations to Pennsylvania personal income taxation and Pennsylvania corporate
net income taxation. We point out that under federal law, obligations, and the
interest on such obligations, of the United States may not be taxed by any
state. 31 U.S.C. ss. 3124(a). The Supreme Court of the United States in American
Bank and Trust vs. Dallas County, 463 U.S. 855 (1983) interpreted this exception
very broadly to extend to every form of taxation, direct or indirect. Our
research has found no case that has ruled on the issue of whether gains on U.S.
obligations may be taxed by a state, and we have made no separate legal analysis
concerning the effect of American Bank and its progeny on the issue of taxation
of gains on U.S. obligations. We understand that numerous states other than
Pennsylvania also impose income taxes on gains on U.S. obligations. Despite the
apparent common practice by states of taxing gains on U.S. obligations, we
express no opinion concerning the question whether Pennsylvania is permitted
under federal law to impose income taxes on gains on U.S. obligations due to the
lack of judicial guidance and the broad interpretation by the Supreme Court of
the federal statute setting forth the prohibition on state taxation of U.S.
obligations.
Although you have not requested our opinion concerning the
application of the Pennsylvania capital stock tax or the Pennsylvania franchise
tax (72 P.S. ss.ss. 7601 to 7606), we point
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out to you that the Pennsylvania Department of Revenue has taken the position
that shares of funds similar to the Pennsylvania Series are not considered
exempt assets of a corporation for the purpose of determining its capital stock
value subject to the Commonwealth's capital stock tax or franchise tax. We also
point out to you that the Pennsylvania Department of Revenue takes the position
that interest or premiums received as a result of repurchase agreements are
taxable for Pennsylvania income tax purposes on the basis that such interest or
premiums are attributable to the repurchase loan and not to federal or state
obligations.
This opinion is furnished to you specifically in connection
with the Pennsylvania Series and solely for your information and benefit. It may
not be relied on by you in any other connection, and it may not be relied on by
any other person for any purpose. It may not be assigned, used or quoted without
our prior written consent. We undertake no responsibility to update this
opinion.
Very truly yours,
/s/Kirkpatrick & Lockhart
LAW OFFICES
SANDS, ANDERSON, MARKS & MILLER
A PROFESSIONAL CORPORATION
THE ROSS BUILDING
801 EAST MAIN STREET
POST OFFICE BOX 1998
RICHMOND, VIRGINIA 23216-1998
February 20, 1990
First Investors Management Company, Inc.
120 Wall Street
New York, New York 10005
Re: First Investors Multi-State Insured
Tax Free Fund (Virginia Series)
Dear Sirs:
We have acted as your special Virginia tax counsel in connection with
the First Investors Multi-State Insured Tax Free Fund (the "Fund") and the First
Investors Virginia Insured Tax Free Series (the "Virginia Series") proposed to
be established as a part of the Fund.
As such counsel, we have examined the Prospectus (the "Prospectus") and
the Statement of Additional Information (the "Statement"), each relating to the
Virginia Series and certain other series of the Fund; we have considered the
provisions of applicable law, particularly those of Title 58.1 of the Code of
Virginia (1950), as amended, dealing with the subject of taxation in the
Commonwealth of Virginia, and the Individual Income Tax Regulations promulgated
by the Virginia Department of Taxation (the "Department") thereunder, and
certain informational bulletins and releases published by the Department; and we
have consulted informally with certain Department personnel. Based upon such
considerations, and upon the assumptions set forth below, we are of the opinion
that:
(a) Interest on exempt obligations received by the Virginia Series and
passed through to shareholders in a qualifying distribution, as defined
in Section 852 of the Internal Revenue Code, will retain its exempt
status in the hands of the shareholders, subject to the qualifications
set forth in clause (c) below.
(b) Exempt distributions, for Virginia personal income tax
purposes, include distributions that are exclusively (i) both exempt
from federal income taxation and derived from interest on obligations
of the Commonwealth of Virginia or any of its political subdivisions,
or (ii) without regard to any exemption from federal income tax,
derived from obligations of a Virginia municipality, commission,
authority or similar entity for which a Virginia income tax exemption
is independently provided by the specific enabling legislation. Such
independently exempt obligations include, among others, obligations
issued under the Virginia Public Finance Act, certain revenue bonds for
transportation facilities, and obligations issued by the Virginia
Housing Development Authority, the Virginia Education Loan Authority,
and industrial development authorities created pursuant to the Virginia
Industrial Development and Revenue Bond Act.
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(c) If a distribution includes both taxable and tax-exempt
interest, the entire distribution is presumed to be taxable for
Virginia personal income tax purposes unless the exempt portion can be
determined with reasonable certainty and substantiated. In published
pronouncements, the Department advises that it generally requires an
investor to provide an allocation between taxable and exempt income
earned on a monthly basis, or in some other reasonable manner to be
provided by the Fund (VR 630-2-322; PD 89-187).
(d) As a general rule, to the extent an individual shareholder
of the Virginia Series will recognize capital gain for federal income
tax purposes (whether as a result of the sale of securities by the
Virginia Series or the sale of securities by the Virginia Series by the
shareholder), such gain will also be recognized for Virginia income tax
purposes. In certain instances, however, profit on the sale of
obligations is expressly exempt from Virginia taxation by the
legislation creating the issuing entity.
(e) Interest on indebtedness incurred (directly or indirectly)
by shareholders to purchase or carry shares of the Virginia Series will
not be deductible for Virginia income tax purposes.
In rendering this opinion, we have assumed that the Virginia Series
intends to qualify and will continue to be qualified as a regulated investment
company; that distributions to shareholders of the Virginia Series will be
qualifying distributions as defined in Section 852 of the Internal Revenue Code;
and the Fund and the Virginia Series will be operated in the manner described in
the Prospectus and the Statement.
Except for the Virginia tax disclosure relating to the Virginia Series
appearing in the Prospectus under the heading "Taxes," and the information
appearing in both the Prospectus and the Statement designated as "Special
Considerations for the Virginia Series," all having been prepared by us for
inclusion therein, we express no opinion as to the accuracy or adequacy of the
Prospectus or the Statement.
<PAGE>
Our separate consent to our designation as Virginia tax counsel to the
Fund, and to the use of a summary of this opinion in the Prospectus is furnished
to you concurrently herewith.
Respectfully yours,
/s/Sands, Anderson, Marks & Miller
