Funding a 501 C3 Project

Funding underwriting for IRC 145 projects involving Qualified 501(c)(3) Bonds can be complex but rewarding. Here's a general overview of how it works:

Funding and Financing

1. Eligibility: The project must be owned by a 501(c)(3) organization or a governmental unit. The 501(c)(3) organization issues the bonds. These bonds are tax-exempt, meaning the interest investors earn is not subject to federal income tax.

3. Volume Cap: The volume cap is the limit on the amount of tax-exempt bonds that can be issued annually. It is determined based on the state's population and allocated among various issuing authorities.

4. Financing Structure: The financing can be structured in various ways, including up to 100% financing where the entire project cost is covered by the bond proceeds. However, this is not always the case, and sometimes additional funding sources may be needed.

5. Use of Proceeds: The proceeds from the bonds must be used to finance property owned by the exempt organization or a governmental unit.

6. Private Business Use Test: The project must meet the private business use test, meaning that the use of the financed property must be primarily for the exempt purposes of the organization. 

Steps to Fund an IRC 145 Project

1. Project Planning: Develop a detailed project plan, including the scope, budget, and timeline.
2. Bond Counsel: Engage bond counsel to ensure compliance with federal tax laws and regulations.
3. Application for Volume Cap: Apply for a portion of the state's volume cap to allocate to the project.
4. Bond Issuance: Work with an underwriter to issue the bonds and secure investors.
5. Project Execution: Use the bond proceeds to finance the project, ensuring compliance with all regulatory requirements.