CHEFA can finance an institution's capital projects and related costs, so long as the project is related to the tax-exempt purpose of that institution. These projects may consist of larger components such as acquisition, construction, renovation, furniture and equipment and other capital needs, as well as smaller elements including computers, telecommunications equipment and health care technology. Other eligible projects include refinancing outstanding taxable or tax-exempt debt, mortgages and loans.
There are costs in addition to the core project that may be eligible for inclusion in your tax-exempt financing. The following are some of the costs CHEFA can usually finance under a bond transaction.
IRS regulations state that not more than 5% of net bond proceeds may be used for private business use or trade or business activity unrelated to the nonprofit purpose of the borrowing institution. An example of what may be considered private business use might be physician offices located within a hospital, or a bank branch within a university student center building.
Any project that is not related to the underlying tax-exempt purpose of that institution cannot be financed with tax-exempt funds. For example, any project that may produce unrelated taxable business income, including a related facility location, would be ineligible. CHEFA staff can help you to review your proposed projects for eligibility. If the unrelated taxable component is a portion of a larger tax-exempt project, the unrelated purpose can be structured as a taxable part of the financing. There are various thresholds of tax law that serve to optimize the amount of tax-exempt debt that can be funded for a particular project.
CHEFA cannot finance projects for any facility to be used for religious instruction or worship (for example chapels), or any facility used primarily by a school or department of divinity.
For more information on project eligibility, please contact our New Business Department by calling (860) 520-4700 or e-mailing .
