501(c)(3) Bonds

Government agencies issue bonds to finance a variety of economic or public development projects for private and public entities. When investors purchase bonds, they essentially lend money to the borrower through the issuer. In return for the bond proceeds, the borrower promises to pay the investors/bondholders the principal amount plus a specified rate of interest over the life of the bonds based on the bonds debt service payment schedule. In this way, a bond is similar to a complex loan.

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$3.4 billion

Total green and social bonds issued by IBank

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59,327

Jobs that have been created through bond-financed projects in California

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$52.5 billion

Total bond activity

Municipal Bonds

Bonds issued by government agencies are called municipal bonds. The proceeds of the bonds are used to finance projects that benefit the community such as roads, schools, bridges, sewers, parks or water treatment. Most bonds issued by government agencies are tax-exempt. This means interest on these bonds are excluded from gross income for federal tax purposes. In addition, interest on the bonds is exempt from State of California personal income taxes.

Who is a conduit bond issuer?

As a conduit issuer, IBank does not underwrite the bonds in house. IBank issues bonds on behalf of a borrower and then lends those proceeds to that borrower. The bonds are special, limited obligations payable solely by the borrower’s payments. The borrower provides security to the bondholder and agrees to repay the bonds.

501(c)(3) Bonds

Tax-exempt financing to eligible nonprofit public benefit corporations for the acquisition and/or improvement of facilities and capital assets. Qualified 501(c)(3) bonds are tax-exempt qualified private activity bonds issued by a state or local government, the proceeds of which are used by a 501 (c)(3) organization to continue their mission and exempt purpose.

Eligible 501(c)(3) Bond Applicants
Typical examples of nonprofit corporations include cultural facilities such as museums, libraries, aquariums, and historic preservation; educational facilities such as universities, colleges and schools; charitable organizations and foundations; recreational facilities such as community centers, local sports facilities and YMCAs; research institutes and centers; organizations that promote social benefits such as the prevention of cruelty to children and animals.

Eligible 501(c)(3) Projects
Capital expenditures, refunding prior debt (under certain circumstances), reimbursing prior expenditures (under certain conditions), (limited) working capital, costs of issuance, capitalized interest and debt service reserve funds.

View our most recently issued IBank Bonds

IBank issues bonds for a variety of projects throughout the state including museums, educational facilities and performing arts centers, research institutes, manufacturing facilities and more. Some of the most iconic projects that have been financed with the help of IBank issued bonds include the Bay Area Toll Bridge, the Petersen Automotive Museum, the Academy Museum of Motion Pictures, the J. Paul Getty Museum, the B Street Theatre (Sophia) and more. Check out some of the projects that have used IBank issued bonds.

View our most recent issued IBank Bonds

Frequently Asked Questions and Fact Sheet

IBank Issued Bonds

Q: What are the credit standards for 501(c)(3) bonds?

A: Bonds issued by IBank must meet established minimum credit rating standards, based on the credit of the applicant or a credit enhancement from a bank, insurance company or other guarantor acceptable to IBank. For details, please refer to IBank Policies and Procedures for Conduit Bonds.

Q: Are there additional benefits to a 501(c)(3) bond over a tax-exempt bond?

A: This bond type is available only to qualified 501 (c)(3) organizations. As with other tax-exempt bonds, 501(c)(3) bonds benefit borrowers because they pay less interest on these bonds than they would on a taxable bond or bank loan.

Q: What are the benefits of a 501(c)(3) bond financing?

A: IBank issued 501(c)(3) bonds feature low interest rates, long-term financing, flexible terms as well as allowing borrowers to retain endowments and accumulated funds and allows the project to be completed now and repaid from future revenues.