Research · Decision tree
Which bond fits? Small issue, exempt facility or taxable
The questions bond counsel will ask first, in order. Open each answer to see where it leads. This is a first screen, not an opinion: counsel decides whether a project qualifies.
Is the borrower a nonprofit organised under IRC §501(c)(3), using the facility for its exempt purpose?
Yes
Qualified 501(c)(3) bond (IRC §145). No volume cap and no $10 million limit; private business use must stay within the limits.
No
Is the project one of the exempt facilities in IRC §142 — solid waste disposal, water or sewage, qualified residential rental, local electric or gas, airport, dock, spaceport, or another listed type?
Yes
Exempt facility bond (IRC §142). No $10 million limit, but each category has its own use tests; privately owned facilities generally need volume cap. Recycling plants often fit solid waste disposal (Treas. Reg. §1.142(a)(6)-1).
No
Is it a manufacturing facility — producing or processing tangible personal property (IRC §144(a)(12)(C))?
Retail, offices, hotels, restaurants and stand-alone warehouses are not manufacturing.
Yes
Is the issue $10 million or less, with capital spending at the site over the six-year test period within $20 million, and the borrower’s other outstanding tax-exempt facility bonds keeping it within $40 million?
The capital expenditure election raises the $1 million limit to $10 million (IRC §144(a)(4)); the $40 million test is in IRC §144(a)(10).
Yes
Qualified small issue bond (IRC §144(a)). Apply for volume cap with an inducement in hand. Check the cost against a bank loan in the calculator: below a few million dollars the fixed costs often outweigh the rate saving, and a bank direct purchase is usually the cheapest route.
No
Too large for the small-issue route alone. Options: split the project into a tax-exempt piece within the limits and a taxable piece; see whether part of it is an exempt facility (for example solid waste disposal); or finance it on taxable terms. Bond counsel decides how the limits apply.
No
Is the borrower a first-time farmer buying land or depreciable farm property?
Yes
First-time farmer bond (IRC §147(c)(2)). A lifetime limit per farmer applies and volume cap is needed.
No
Taxable financing. The project does not fit a tax-exempt category. Compare a bank loan, an SBA 504 or 7(a) loan, or taxable bonds; state programmes may still help.
Next steps ¶
- Run the qualification check with your project’s numbers.
- Read the federal tests in the guide.
- See how your state allocates volume cap in the state guides.
Important information. Securitief Research is published by Securitief, operated by Applied America. Securitief is not a placement agent or underwriter and does not seek or receive compensation from any financing, including financings of issuers and borrowers discussed here. It is not acting as a municipal advisor and owes no fiduciary duty to any issuer or obligated person unless separately engaged in writing.
This material is general information. It is not tax, legal, investment or municipal advice, a recommendation, or an offer to sell or a solicitation of an offer to buy any security. Offers are made only by offering documents and only where permitted by state securities laws. State allocation procedures change; confirm current rules with the allocating agency and bond counsel.
Sources: SEC Form N-PORT and FDIC call reports (holdings), IRS and Census (volume cap and population), state agency publications. Issuer classification and aggregation are Securitief’s own and may contain matching errors; figures may be revised. No licensed index levels (MMD, BVAL, ICE) or EMMA trade data are used. Past holdings do not indicate future demand, pricing or the availability of financing. Interest on private activity bonds may be subject to the alternative minimum tax; tax treatment depends on the facts and the opinion of bond counsel.
Cite this page: Securitief Research, “Which bond fits? A decision tree,” October 2026, https://securitief.com/decide.