Frequently Asked Questions
Who is eligible for the Pooled Financing Election for 501(c)(3) Organizations?
95% of proceeds must be used for loans to two or more 501(c)(3) organizations or governmental units, with specific demand survey and disbursement timelines.
How does the Pooled Financing Election for 501(c)(3) Organizations work?
Allows an issuer to elect a special maturity rule for pooled financing of 501(c)(3) organizations, facilitating access to lower-cost tax-exempt debt.
What law authorizes the Pooled Financing Election for 501(c)(3) Organizations?
The Pooled Financing Election for 501(c)(3) Organizations is authorized under IRC §147(b)(4) of the Internal Revenue Code (Title 26, United States Code).
Statutory Text — IRC §147
Source: Internal Revenue Code, Title 26, United States Code
§ 147. Other requirements applicable to certain private activity bonds(a) Substantial user requirement(1) In generalExcept as provided in subsection (h), a private activity bond shall not be a qualified bond for any period during which it is held by a person who is a substantial user of the facilities or by a related person of such a substantial user.
(2) Related personFor purposes of paragraph (1), the following shall be treated as related persons—(A) 2 or more persons if the relationship between such persons would result in a disallowance of losses under section 267 or 707(b),
(B) 2 or more persons which are members of the same controlled group of corporations (as defined in section 1563(a), except that “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears therein),
(C) a partnership and each of its partners (and their spouses and minor children), and
(D) an S corporation and each of its shareholders (and their spouses and minor children).
(b) Maturity may not exceed 120 percent of economic life(1) General ruleExcept as provided in subsection (h), a private activity bond shall not be a qualified bond if it is issued as part of an issue and—(A) the average maturity of the bonds issued as part of such issue, exceeds
(B) 120 percent of the average reasonably expected economic life of the facilities being financed with the net proceeds of such issue.
(2) Determination of averagesFor purposes of paragraph (1)—(A) the average maturity of any issue shall be determined by taking into account the respective issue prices of the bonds issued as part of such issue, and
(B) the average reasonably expected economic life of the facilities being financed with any issue shall be determined by taking into account the respective cost of such facilities.
(3) Special rules(A) Determination of economic lifeFor purposes of this subsection, the reasonably expected economic life of any facility shall be determined as of the later of—(i) the date on which the bonds are issued, or
(ii) the date on which the facility is placed in service (or expected to be placed in service).
(B) Treatment of land(i) Land not taken into accountExcept as provided in clause (ii), land shall not be taken into account under paragraph (1)(B).
(ii) Issues where 25 percent or more of proceeds used to finance landIf 25 percent or more of the net proceeds of any issue is to be used to finance land, such land shall be taken into account under paragraph (1)(B) and shall be treated as having an economic life of 30 years.
(4) Special rule for pooled financing of 501(c)(3) organization(A) In generalAt the election of the issuer, a qualified 501(c)(3) bond shall be treated as meeting the requirements of paragraph (1) if such bond meets the requirements of subparagraph (B).
Showing first 3,000 characters of full section text.