Nonprofits Industry
Tax-exempt financing: traps for the unwary executive. (Taxing Issues).(tax-exempt bonds)
Non-profit Times, The, November, 2002 by Berger, Harvey; Ichel, Gregg
Has your organization ever utilized tax-exempt bonds to finance a facility? Are you contemplating cheaper tax-exempt borrowing alternatives to help cover various improvements? if the answer is (or has been) "yes," there are a number of tax rules you must comply with to preserve the bonds' tax-exempt status.
Perhaps the most critical requirement is that you pay any arbitrage income to the Internal Revenue Service (IRS), unless an exception applies. This requirement is contained in Code Section 148 and applies to almost all issuers of tax-exempt bonds. However, it is often overlooked, which can lead to serious consequences for you and the holders of the bonds.
Most bond documents that issuers (and conduit borrowers) execute contain an ongoing covenant...
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