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Tax-Exempt Bonds: Nonprofit Ownership
ELIGBLE ORGANIZATIONS
Organizations with a 501(c)(3) determination letter from the IRS
ELIGIBLE ACTIVITIES
Nonprofit organizations can use tax-exempt bonds to finance housing that is directly related to their mission, including:
- Construction and rehabilitation of buildings
- Purchase of land and buildings
- Refinancing of existing capital debt
- Pre-Development costs, such as architectural, engineering, accounting, legal costs directly related to project
Low-Income Housing Tax Credits cannot be used with this type of bond.
ELIGIBLE FACILITIES & EQUIPMENT
The full range of living options provided by nonprofit organizations can be financed:
- Independent living units (apartments)
- Assisted living units
- Group homes
- Transitional housing
- Single room occupancy units
- Emergency shelters
- Residential facilities for the homeless
- Limited equity cooperatives (restrictions apply)
- Nursing homes
- CCRCs (continuing care retirement communities)
- Housing for special-needs populations
FINANCING LARGE & SMALL LOANS WITH STEP OR PUBLIC BOND SALES
Smaller projects generally use the Streamlined Tax-Exempt Placement (STEP) Program. It uses standardized documents to save time and costs. The lender makes the credit decisions. The lender earns tax-exempt interest from the bond and passes the savings on to the borrower.
Larger projects, when borrowing typically exceeds $5 million, investment banks sell the bonds publicly to retail and institutional investors.
APPLICATION
10/07/2008