Vol. 11, No. 6, Pg. 20. Economic Boosters for Nonprofits.

• Author: By Kathleen Crum McKinney

South Carolina Lawyer

2000.

Vol. 11, No. 6, Pg. 20.

Economic Boosters for Nonprofits

20Economic Boosters for NonprofitsBy Kathleen Crum McKinneyAre you currently serving as a board member for your favorite charity? Do other organizations often ask you to serve on their boards? Most nonprofits seek lawyers to fill board positions, expecting them to be aware of the legal considerations related to their missions. But lawyers who serve as board members can also contribute by making the organization's leadership aware of economic incentives that can help them achieve their mission at a reduced cost.

22South Carolina has many economic incentives available to attract new industrial projects or secure expansions. . . . nonprofit institutions have generally not been as aware of the economic incentives available to them. South Carolina has many economic incentives available to attract new industrial projects or secure expansions. These incentives operate in various ways but are generally designed to reduce the cost of either investment capital or ongoing operations. While these incentives have been successfully utilized throughout the state in the for-profit sector, nonprofit institutions have generally not been as aware of the economic incentives available to them.

Corporations organized under § 501(c)(3) of the Internal Revenue Code (IRC)-especially those providing services in the areas of recreation, health and education-should review the available incentives prior to undertaking new or expanded facilities or increasing employment. Services provided by these organizations have repeatedly been found by the courts as serving a valid public purpose and thus eligible to receive state offered economic benefits. Jacobs v. McLain, 262 S.C. 425, 205 S.E.2d 172 (1974); Nichols v. South Carolina Research Authority, 290 S.C. 415, 351 S.E.2d 155 (1986).

TAX-EXEMPT BONDS

Qualifying projects. One substantial incentive is the availability of tax-exempt bonds to provide facilities for many nonprofit institutions. These bonds are often secured by a letter of credit issued by a financial institution, resulting in variable interest rates of less than four percent per year based on a five-year historical average. Even when computing the cost of the letter of credit and placement fees, the all-in interest cost averages approximately five percent per year. Representative nonprofit institutions that have accessed such financing in South Carolina include the American Red Cross, YMCAs, hospitals, congregate care, assisted living and nursing facilities, residential programs for children needing medical services, community centers and alcohol and drug abuse rehabilitation centers.

Specifically, the YMCA projects have included traditional recreational facilities as well as wellness centers operated on a cooperative basis with acute care hospitals. The elderly care facilities have often been, but need not be, affiliated with religious denominations. Museums and other facilities with a nexus to education or tourism, if established as a 501(c)(3) organization and found to serve a public purpose, are also eligible for tax-exempt financing.

The majority of the above-referenced projects...