Qualified Section 501[c] [3] Bond Law and Legal Definition

Qualified section 501(c) (3) bond is a tax-exempt private activity bond issue, the proceeds of which are used to finance property owned by a charitable organization. The primary beneficiaries of these bonds are private, nonprofit hospitals, colleges, and universities.

A section 501(c)(3) bond must meet the following conditions:

1) all property financed by the net proceeds of the bond issue is to be owned by a section 501(c)(3) organization or a governmental unit; and

2) the bond would not be a private activity bond if section 501(c)(3) organizations were treated as governmental units with respect to their activities that are not related trades or businesses, and the private activity bond definition was applied using a five percent threshold rather than a ten percent threshold.