15-2. NONPROFIT OWNER/PURCHASER

• A. The AE must determine if the nonprofit owner/purchaser meets the following criteria must:

  1. Be financially solvent with no open or unresolved audit findings or findings from analyses of the audited annual financial statements.

  2. Have a tax exemption ruling from the Internal Revenue Service under Section 501(c)(3) of the Internal Revenue Code of 1986.

     • a. If the nonprofit is applying for the tax exemption ruling, the entity is eligible. However, increased rents will be withheld until the entity provides HUD with evidence that the tax exempt ruling has been issued.

     • b. Exceptions:

       • 1. Any project where the nonprofit owner was not previously required to have a 501(c)(3) rating from the IRS to participate in HUD programs.
       • 2. Limited-Equity Cooperative entities that are not 501(c)(3) eligible.

Chapter Fifteen – Published March 2023

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• 3. Have a resolution from the organization’s Board of Directors that authorizes the additional debt to be incurred to purchase and/or rehabilitate the project.

• B. An unacceptable nonprofit owner includes:

  1. A public body or instrumentality of a public body, or,

  2. An entity whose organizational documents permit any part of its net earnings to inure to the benefit of any private shareholder, contributor, or individual.