An exempt facility bond requires 95 percent or more of net proceeds to be used to provide the qualified residential rental project

bond.financial.ninety_five_percent_of_net_proceeds · v1.0.0

A bond is an exempt facility bond only if it is issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide one of the listed exempt facilities, of which qualified residential rental projects are item (7). No more than 5 percent of net proceeds may go elsewhere. This is a use-of-proceeds test set at issuance, but it does not stop mattering afterwards: a project that ceases to be a qualified residential rental project takes the 95 percent test down with it, because the facility the proceeds were used to provide is no longer a listed exempt facility, and 1.103-8(b)(6)(i) makes that failure retroactive to the date of issue. An operator has no way to cure a proceeds defect and every reason to know whether one exists before agreeing to indemnify anyone about the bonds.

Confidence

medium

Effective from

1986-10-22

Last reviewed

2026-08-30