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Qualified 501(c)(3) Bonds

501(c)(3) Organizations are permitted to finance projects with Tax-Exempt Bonds if they meet the requirements of Section 145 of the Code. These requirements include (1) all property that is to be provided by the Net Proceeds of the Bonds must be owned by a 501(c)(3) Organization or by a governmental unit; (2) the Private Business Tests under Section 141(b) of the Code must not be satisfied, treating the 501(c)(3) Organization which is the Conduit Borrower and any other 501(c(3) Organization using the Bond-financed facilities as a governmental unit with respect to its activities that do not constitute an unrelated trade or business with respect to its respective exempt purpose and by substituting 5% for 10% in the private business use tests; and (3) the Private Loan Financing Test must not be met.


See Also

Private Activity Bond (PAB)

The term used in the Code to describe any bond issued as part of a bond issue that meets both of the private business tests or meets the private loan financing test.

501(c)(3) Organization

An organization that is exempt from federal income taxation under Section 501(a) of the Code.

Conduit Financing

Financing in which the Issuer issues the bonds to finance a project to be used primarily by a third party.

Related

Port of Seattle, Washington. Source: Wikimedia Commons
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Term of the Week

Securities Act of 1933

Law designed to ensure that investors are provided with material information about new issues of securities offered for sale to the public.