May 2017
IRS Guidelines Provide Greater Flexibility to Nonprofit Borrowers

New guidelines from the Internal Revenue Service substantially overhaul safe harbors that have existed for 20 years. Specifically, the IRS recently released Revenue Procedure 2017-13 (“Rev. Proc. 2017-13”), which establishes certain safe harbors from the characterization of a management or service contract as private business use.

Nonprofit organizations that are exempt from federal income taxation under Section 501(c)(3) (“Tax Exempt Organizations”) of the Internal Revenue Code of 1986, as amended (the “Code”) and have assets that are financed with the proceeds of tax-exempt bonds (“Bond-Financed Property”) will likely require some revisions to their standard contract provisions to address certain requirements included within the Rev. Proc. 2017-13 safe harbors.

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