Nonprofit Organizations Committee

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Legal Quick Hit (Webcast presentation during the meeting)

Tax-Exempt Financing: Worth Considering for Nonprofits, but Don't Ignore the Costs & Compliance Burdens

One benefit of 501(c)(3) status is the ability to borrow at tax-exempt interest rates. Judicious use of tax-exempt debt to spread the cost of long-lived capital assets over their expected useful lives can relieve pressure on operating budgets. When choosing between tax-exempt financing and conventional financing, a nonprofit organization should weigh the interest rate savings against the higher transaction costs and ongoing compliance burdens associated with tax-exempt finance. This Legal Quick Hit will be led by two members of Venable's public finance practice and will provide an overview of which expenditures are eligible for tax-exempt financing. It also will detail the costs and compliance burdens that need to be weighed against the benefits of such financing. Specific topics to be covered include: * The process: what do you have to go through to issue tax-exempt debt? * The benefits: interest rate savings * The transaction costs: added costs over borrowing on a taxable basis * More on the costs: ongoing compliance burdens * Is it worth it?: who and what to ask Walter R. Calvert, Partner, Venable LLP Davis V.R. Sherman, Partner, Venable LLP

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