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Note 8—Fixed Assets Leasehold improvements and equipment are valued at historical cost or estimated historical cost if actual historical cost is not available. Depreciation and amortization are provided on a straight-line basis over the estimated useful life of the assets. As of December 31, 2011, fixed assets, net of accumulated depreciation and amortization, were as follows: Land $ 575,693 Water Shares 295,737 Augmentation Station(80%) 5,776 Equipment 31,920 Buildings 130,249 Accumulated Depreciation (38,440) TOTAL $ 1.000.93 Depreciation for 2011 was$4,980. Note 9--Income Taxes As a water association, CWPDA is exempt from federal and state income tax under Internal Revenue Code 501(a) as long as 85% of its gross income is from members. For 2011, the company met this requirement and is exempt from federal and state income taxes. Note 10—Arkansas River Replacement Plan Under the Arkansas River Replacement Plan (Pre-1986) Application Approval-2005 Plan Year, CWPDA must agree to replace out of priority depletions to senior surface rights in Colorado and depletions to usable Stateline flows occurring after the expiration date of the plan (March 31, 2006) which are caused by diversions of ground water during the life of the plan. To guarantee that sufficient augmentation water will be provided to replace such depletions, a current financial warranty from CWPDA is to be provided.to and held by the State of Colorado sufficient to allow for the purchase of 46,000 acre feet at $12 per acre foot of replacement water. Therefore, a letter of credit or some other acceptable form of security, in the total amount of $555,200, must be provided by CWPDA. Financial warranties must be in a form acceptable to the Division. A commitment of the time-forward allocated Fry-Ark return flows and a commitment of future allocations of municipal Fry-Ark project water or other renewable resources may also be made by CWPDA to offset a portion of these depletions. 7