Chapter 22 - § 22.2 • PARTICIPANTS IN A TAX-EXEMPT FINANCING

• Jurisdiction: Colorado

§ 22.2 • PARTICIPANTS IN A TAX-EXEMPT FINANCING

The participants in a traditional qualified § 501(c)(3) bond issue generally may include the following parties. Note also that each of these parties may be represented by its own counsel in any given bond issue. For additional discussion of the participants in tax-exempt financings, see ABA Section of State and Local Government Law, ABA Section of Business Law — Committee on Federal Regulation of Securities & National Association of Bond Lawyers, Disclosure Roles of Counsel in State and Local Government Securities Offerings 54-64 (American Bar Association, 3d ed. 2009) (hereinafter "ABA Disclosure Roles").

§ 22.2.1—State or Political Subdivision Issuer

As further discussed in § 22.3.1 below, to bear tax-exempt interest, obligations must be issued by, or on behalf of, a state or political subdivision of a state. I.R.C. §§ 103(a) and (c); Treas. Reg. § 1.103-1(b). The issuer's role in a typical tax-exempt § 501(c)(3) financing is to issue the bonds and loan the proceeds of the bonds to the § 501(c)(3) borrower. Cf. ABA Disclosure Roles at 54-55. The proceeds of the bonds are typically loaned to the § 501(c)(3) organization borrower under a loan agreement between the issuer and the § 501(c)(3) borrower, which loan agreement is then pledged or assigned as the source of repayment of the bonds. Id.

In Colorado, potential issuers of qualified § 501(c)(3) bonds for each issuers' statutory purposes include (but are not limited to) the Colorado Educational and Cultural Facilities Authority (see generally C.R.S. §§ 23-15-101, et seq.), the Colorado Health Facilities Authority (see generally C.R.S. §§ 25-25-101, et seq.), the Colorado Housing and Finance Authority (see generally C.R.S. §§ 29-4-701, et seq.), and cities and counties under certain specified circumstances (interview with Frederic H. Marienthal, Partner, Kutak Rock LLP, in Denver, Colo. (March 22, 2011); see also C.R.S. §§ 29-3-101, et seq. (County and Municipality Development Revenue Bond Act)).

Practice Pointer
The loan agreement between the issuer and the § 501(c)(3) organization borrower is one of the principal documents that will allocate various responsibilities relating to the bond issue among the issuer and the borrower. Many of these responsibilities will ultimately be borne by the § 501(c)(3) organization borrower. These responsibilities generally include most or all post-issuance compliance actions and monitoring required with respect to the

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