The discount rate used to determine the APBO was 8.25 percent. A 9 percent health It is the opinion of the Smithsonian's management that the Smithsonian is also ex- 

 care cost trend rate was assumed for fiscal year 1997, decreasing 0.5 percent each year empt from taxation as an instrumentality of the United States as defined in Section 

 to an ultimate rate of 5 percent in fiscal year 2005 and thereafter If the assumed health 501(c)(1) of the Code. Organizations described in that section are exempt from all in- 

 care cost trend rate was increased by 1 percent in each year, the net periodic postretire- come taxation. The Smithsonian has not yet formally sought such dual status, 

 ment benefit cost would be higher by $200,000 and the APBO higher by $1,300,000 as 

 of September 30, 1997. (16) Bond Offering 



In December 1997, the District of Columbia issued $41.3 milli on of tax-exempt rev- 



(15) Income Taxes ame bon( ^ on behalf of the Smithsonian. The bonds mature at various dates through 



The Smithsonian is exempt from income taxation under the provisions of Sec- the year 2028, with yields ranging from 4.0 to S.17 percent. These bonds were sold to 



tion 501(c)(3) of the Internal Revenue Code (the Code). Organizations described in finance certain renovations of and improvements to the National Museum of Natural 



that section are taxable only on their unrelated business income. Periodical advertising History, fund capitalized interest, and pay certain costs of issuing the bonds, 

 sales is the main source of unrelated business income. An IRS determination letter has 

 been received supporting the Smithsonian's tax-exempt status. No provision for in- 

 come taxes was required for fiscal year 1997. 



313 



