Lenora Williams  NONPROFIT GURU - Company Message
RSS Follow Become a Fan

Delivered by FeedBurner

Recent Posts

Attorneys: Links for Pro-Bono Nonprofit Business Attorneys
Types of Nonprofits by Definition
Nonprofit Internships - Igdealist.org
What are NGOs? - Are they Nonprofits?
KBLX 102.9 Nonprofit Weekend Tip! What are 501c4 Organizations?


KBLX Exhibit Discounts
KBLX Nonprofit Weekend Tips
News - General News Worthy Nonprofit Info
NEWS - Nonprofits Execs Possibly Facing Jail Time
Nonprofit Articles
Nonprofit Audit Info
Nonprofit Budget Templates
Nonprofit Business Attorneys
Nonprofit Compliance
Nonprofit Compliance Laws
Nonprofit Defined
Nonprofit Education
Nonprofit Emergency Funding
Nonprofit ERISA - 403(b) retirement plans
Nonprofit financial education
Nonprofit Financial Report Info
Nonprofit Fiscal Agent/Sponsorship
Nonprofit Health Care Compliance
Nonprofit Internships
Nonprofit Published Articles
Nonprofit Reserves - Cash
Nonprofit Start-Up
Nonprofit Surveys
powered by

My Blog

KBLX 102.9 FM Weekend Tip - Nonprofit Facility Purchase - Enhance Capital Campaign Strategies-Enterprise Zones/Tax Exempt Bonds

Enterprise zones and Tax-Exempt Bonds are ways for nonprofits to look at purchasing facilities:
California provides for special tax incentives to encourage investment in specific geographic areas targeted for economic revitalization –-- Called Enterprise Zones 
Banks or Lenders and Property Owners Leasing to nonprofits in Enterprise Zones -- Receive net interest deductions
Creating incentives for both Lenders and Owners to work with nonprofits 
Tax-exempt bonds are similar to conventional loans but are costly to set up.
Interest income earned is exempt from state and local taxes which allow the lender to pass savings to the nonprofit borrower in the form of lower interest rates.
California provides for special tax incentives to encourage investment in specific geographic areas targeted for economic revitalizing called Enterprise Zones within the state. One of these incentives is the net interest deduction. It is available to banks and other lenders. The requirements are simple. If a bank or lender makes a qualified loan to a qualified debtor, it is allowed to deduct the net interest received from such loan against its California taxable income.To be a qualified transaction, the loan must be made to a debtor that is engaged in a “trade or business” in an Enterprise Zone. The term “trade or business” is generally defined for tax purposes as “an activity engaged in forprofit.” When a bank or lender makes an otherwise qualified loan to a nonprofit organization, the question arises as to whether a nonprofit is engaged in a trade or business, and thus considered to be a qualified debtor for the purposes of the net interest deduction.
In the past, we disallowed debts made to nonprofit organizations based on the general presumption that nonprofit organizations are not engaged in a trade or business as defined under various tax provisions in the Internal Revenue Code and the California Revenue and Taxation Code.
However, California recently revised this policy based on statutory authority in the California Corporation Code that suggests a nonprofit could be recognized as being engaged in a trade or business. The California Corporation Code which governs nonprofit entities affirms the nonprofit’s right to “carry on a business at a profit,”and use that profit for any lawful activity.” Many nonprofit organizations accept donations, conduct fundraising activities, or charge fees. This revenue is used to sustain the organization, pay salaries, interest, fund capital improvements, expansions, etc. These activities are similar to a trade or business engaged to earn a profit.
Therefore,qualified loans made to nonprofit organizations can qualify for the Enterprise Zone net interest deduction if the debtor meets all the other required qualifications.
Tax-Exempt Bonds
Tax-exempt, industrial-revenue bond (IRB) programs are attractive financing options for small manufacturers looking to expand operations and upgrade facilities.What is a Tax-Exempt Bond?Tax-exempt bonds are debt securities issued by a state or local government development agency on behalf of a private business. Once issued,tax-exempt bonds are sold in the open market or purchased by investors or financial institutions. Interest income earned by the bond purchaser is exempt from state and local taxes, which allows the lender to pass savings to the borrower in the form of lower interest rates.Tax-exempt bonds are similar to conventional loans.
Bonds are not grants. Borrowers have to pay back the bond’s principal plus interest to the bond. Applicants have to demonstrate a strong business plan and project proposal, credit worthiness and strong financial statements. In addition,borrowers have to demonstrate how proposed projects will create jobs and positively impact the local economy. Unlike conventional loans, tax-exempt bonds typically offer longer-term financing at considerably lower rates than conventional financing allows.Tax-exempt bonds are not for modest projects. Typically dollars, but smaller, mini-bonds may be issued. In addition, the costs associated with tax-exempt bonds tend to be much higher than conventional loans because the business has to pay its own legal costs.
Carefully consider, bonds are intended to fund projects over a million r your financing needs and your ability to pay tens of thousands of dollars in legal fees before jumping into tax-exemptbonds.What are the Eligibility Requirements? Tax-exempt bonds are intended to create jobs and improve economic conditions in local areas. Businesses eligible for tax-exempt bonds include manufacturing businesses and non-profit organizations. Tax-exempt bonds of up to $10 million can be issued to finance up to 100% of an eligible project.
Eligible users of the funds include expanding facilities and purchasing new machinery and equipment.
Tax-exempt, RIB funds may not be used to refinance existing debt or for venture and working capital.
Other special conditions and terms may vary depending on where your business is located.What is the Application Process? Application requirements and processes vary by state and locality.
Contact your state or local economic development agency to obtain information about available tax-exempt bonds.
Where Can I Read Success Stories? Tax-exempt bonds have been used to successfully expand small businesses and create jobs in communities across the country. Here are some examples:

3 Comments to KBLX 102.9 FM Weekend Tip - Nonprofit Facility Purchase - Enhance Capital Campaign Strategies-Enterprise Zones/Tax Exempt Bonds:

Comments RSS
chana tips on Monday, February 04, 2013 5:24 AM
I always follow the informative blogs like this. Your this blog post is really helpful for the people. Keep sharing blogs like this.
Reply to comment

Lenora Williams on Thursday, May 23, 2013 4:03 PM
Thank you!
Reply to comment

superiorpapers.com coupons on Saturday, August 18, 2018 6:51 AM
The world wide web has made tons of revolutionary changes in almost every aspect of life. You can check every little thing you’re curious about on the internet and it’ll give you lot of options to help you understand.
Reply to comment

Add a Comment

Your Name:
Email Address: (Required)
Make your text bigger, bold, italic and more with HTML tags. We'll show you how.
Post Comment