UNDERSTANDING THETAX-EXEMPT FINANCING PROCESS

Understanding some

basic conceptsApplicable

sourcesof lawParties to a typicaltaxable

financing

Parties to a typical tax-

exempt financing

Potential issuers of tax-exempt

debtPurposes tax-exempt debt

may be issued

UNDERSTANDING THETAX-EXEMPT FINANCING PROCESS

Potential purchasers of

tax-exempt debtPotential borrowers

of proceedsRestrictions on

tax-exempt debt

UNDERSTANDING THETAX-EXEMPT FINANCING PROCESS

Understanding Some Basic Concepts

“Tax-Exempt”An organization which is exempt from paying state or federal income taxes.

Interest on a debt which is exempt from federal or state income taxes.

“Revenue Bonds”Revenue Bonds are payable only from specified revenues.

Revenue bonds may bear interest at fixed rates or variable rates.

Applicable Sourcesof Law

Federal Tax LawFederal tax law determines whether the interest on obligations validly issued under State law is exempt from federal income tax.

State Tax Law

State law determines the validity of obligations.

In limited cases, State law also determines whether the interest on obligations validly issued under State law is exempt from State income tax.

Parties to a Typical Taxable Financing

Parties to a Typical Taxable Financing

Lender

Borrower

Parties to a Typical Tax-Exempt Financing

Purchaser (Lender)

Borrower

Trustee as representative of purchasers

Credit Enhancer

Issuer

Who are the Potential Issuers of

Tax-Exempt Debt

Must be a governmental or quasi-governmental unit

Health Authorities

Cities, Towns and Villages

Redevelopment Authorities

Housing Authorities

Community Development Authorities

For what purposesmay tax-exemptdebt be issued

Hospitals ClinicsContinuing

Care Facilities

Community-Based

Residential Facilities

Private Colleges

and Universitie

s

Federally qualified health centers

K-12 Schools

Research Facilities

Nursing Homes

I designed this PowerPoint Presentation about some of the basics of tax-exempt bond financing. The information contained in this slideshow is incomplete and may be out-of-date at the time of viewing. April L. Trickelwww.linkedin.com/in/apriltrickel