501(c)(3) Revenue Bond Program
501(c)(3) revenue bonds are a low-cost, tax-exempt financing resource for capital improvement projects of qualified nonprofit corporations. In order for a nonprofit corporation to access tax-exempt financing, it must have received a determination letter from the Internal Revenue Service stating that it qualifies as an organization as defined under Section 501(c)(3) of the Internal Revenue Code.
In order for an applicant to qualify for tax-exempt financing, it must be a qualified nonprofit corporation as described above. Typical examples of the purposes for which nonprofit corporations are organized include: cultural facilities such as museums, libraries, aquariums, and historic preservation; charitable organizations such as charities and foundations; recreational facilities such as community centers, local sports facilities and YMCAs; research institutes and centers; and organizations that promote other social benefits such as the prevention of cruelty to children and animals.
Eligible Uses of Bond Proceeds
501(c)(3) revenue bond proceeds may be used for the following purposes: capital expenditures, refinancing prior debt (under certain circumstances), reimbursing prior expenditures (under certain conditions), (limited) working capital, costs of issuance, capitalized interest and debt service reserve funds.
The proceeds of 501(c)(3) revenue bonds must create public benefits in the community where the project is located by enhancing the economic, social, or cultural quality of life for local residents.
The project must be located in California and be consistent with any existing local or regional comprehensive plan.
Bonds issued by the I-Bank must meet established minimum credit rating standards, based either upon the credit of the applicant or a credit enhancement from a bank, insurance company or other guarantor acceptable to the I-Bank.
Benefits of 501(c)(3) Revenue Bond Financing
- Low interest rates
- Long-term financing
- Flexible terms
- Allows borrower to retain endowments and accumulated funds
- Allows project to be completed now and repaid from future revenues
How to Apply
Applications are accepted on a continuous basis and are available on the I-Bank website. The I-Bank Board of Directors normally meets each month to consider approval of applications received at least thirty days prior to the meeting date. Additional information is available by telephone at (916) 322-1399.
The I-Bank is authorized to finance a wide range of projects, including those that serve industrial, recreational, research, commercial, utility, community, educational, cultural, or social welfare purposes, as well as service enterprise facilities, and any parts or combinations thereof, but excluding those for low and moderate income housing.
Nothing contained herein should be construed or relied upon as legal advice. Instead, this information is intended to serve as an overview of the general subject of the use of tax-exempt bonds by nonprofit corporations, from which better-informed requests for advice, both legal and financial, can be formulated.
Request For Post-Bond Issuance Actions (doc) - Complete this request form if you wish for the IBank to take post-bond issuance actions in connection with outstanding IBank bonds. Such actions include, but are not limited to, agreement modifications, Letter of Credit substitutions, mode conversions, redemptions, agent substitutions.
Fariba Khoie, Bond Programs Manager
1325 J Street, 18th Floor
Sacramento, CA 95814
Telephone: (916) 341-6644
FAX: (916) 322-6314