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Home > Building Finance Assistance > Tax-Exempt Financing
Tax-exempt Financing Becoming Popular with Schools
The use of tax-exempt financing for school projects is accelerating in our Archdiocese. More and more schools are taking advantage of tax-exempt interest rates for their project financings, because the loan rates can be from 1% to 2% below taxable rates. CFC provides financial advisory services to Catholic schools in the Archdiocese seeking tax-exempt financing and provides guidance through all steps of that process.
Under this form of financing, which is only available for qualifying school projects (church projects are not eligible), lenders offer lower rates because they don't have to pay income tax on the income from the loan. To qualify, the school must agree to certain restrictions prescribed by the IRS. For example, the school can't limit admissions based on religion and religion can only be taught in classrooms financed by a separate taxable loan. For that reason, elementary schools often do a 50/50 split of taxable and tax-exempt financing. High schools might be able to rely on tax-exempt financing for as much as 90% of their loan. Each case must be examined individually to determine if the qualifications can be met and if you are willing to live by the restrictions for the life of the loan.
To give you an idea of the growing popularity, consider that no schools in our Archdiocese had used tax-exempt financing before the late 1990's. Yet in just the past four years, it's been used by St. Croix Catholic Elementary School, Stillwater; Benilde-St. Margaret High School, St. Louis Park; Convent of the Visitation High School, Mendota; Cretin Derham Hall High School, St. Paul; Faithful Shepherd Catholic School, Eagan; St. Michael School, Prior Lake; St. Pius X School, White Bear Lake; St. Wenceslaus School, New Prague; Totino-Grace High School, Fridley; St. John the Baptist Catholic School, Jordan; and St. Pascal Baylon School, St. Paul. CFC provided assistance to those schools listed in bold.
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