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Post-Bond Issuance Guide
Tax-Exempt Bonds: Nonprofit Ownership
Organizations with a 501(c)(3) determination letter from the IRS
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.
The full range of living options provided by nonprofit organizations can be financed:
Independent living units (apartments)
Assisted living units
Single room occupancy units
Residential facilities for the homeless
Limited equity cooperatives (restrictions apply)
CCRCs (continuing care retirement communities)
Housing for special-needs populations
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.