Multi-Family Tax-Exempt Bonds

NIFA may issue revenue bonds or other debt instruments to finance projects that involve the acquisition, construction, or rehabilitation of rental housing projects in Nebraska for low to moderate-income households. 

If the bonds meet federal tax law requirements, the interest on the bonds is exempt from federal income tax and Nebraska state income tax. The bonds are repaid from the proceeds received by the issuer, which may be NIFA or another qualified originator of private activity bonds. Proceeds may come from the private developer under a revenue agreement, such as a lease, loan agreement, or installment sale contract.

All development applicants using multi-family tax-exempt bonds must participate in the 4% LIHTC NIFA program. A specified minimum percentage of units in the project must be set aside for occupancy by low income households whose income does not exceed 50% or 60% of the Area Median Income (AMI) for the county or MSA where the development is located and the rent for those units must be restricted. All other units in the development must be rented to households whose income does not exceed 150% of the AMI.

Learn more about applications for tax-exempt bonds with the 4% LIHTC NIFA Program

Requirements for Bonds

NIFA may issue bonds as a conduit entity so the interest paid on the bonds is tax-exempt, and generally below the interest rate on non tax-exempt borrowings. It’s the responsibility of the developer and the investment bankers or underwriters to find a purchaser for NIFA-issued conduit bonds. The bonds may be sold either by public sale using an underwriter or by a local bank or other qualified institutional purchaser. The developer will need to work with an underwriter to determine the necessary levels of credit and estimate the likely market rate on the bonds. Acceptable credit examples include: 

  • FHA-insurance on repayment of the loan or
  • A pledge by a mortgage lender of collateral such as securities or mortgages to collateralize the repayment of the loan made by NIFA or
  • A letter of credit covering payment of the bonds or the developer's loan. (If a rating on the bonds is to be obtained, such letter of credit will need to be obtained from a major money center bank.) 

If NIFA is the issuer of the bonds and they are to be sold to the public, NIFA requires that the bonds have a rating of AA or better, or contain credit enhancement from an institution with a credit rating of AA or better. For NIFA-issued bonds sold on a private placement basis, NIFA requires that the purchaser of the bonds execute an investor letter in the form provided by NIFA.

Download the Investor Letter

The loan rate and maturity depend on the credit quality and the interest rates in the financial markets. If using a private investor, the loan terms will depend on the negotiations between the private investor and the developer. NIFA has no control over the terms or rates. Bonds must also comply with the NIFA Multifamily Program Regulations. 

View NIFA Multifamily Program Regulations

Federal Tax Regulations

There are many federal tax law requirements that must be met when NIFA issues bonds for rental housing projects. The use of the bond proceeds to provide residential rental facilities is determined by the federal statutory exemption for rental housing bonds that qualify for tax exemption. According to the Treasury Department regulations and rulings, with certain exceptions, the only project costs that can be financed are those incurred within a timeframe beginning no earlier than 60 days prior to NIFA action. Examples of action is evidenced by adoption by NIFA of an intent resolution for the issuance of tax-exempt bonds. An intent resolution should be adopted as early as possible in financing because, with certain exceptions, costs incurred prior to the 60-day timeframe will not be eligible expenses; only those costs during and after that 60-day timeframe will qualify for tax-exempt financing. 

View the Federal Tax Law Requirements PDF

Allocation of Volume Cap

An allocation of Private Activity Volume Cap must be received before final approval of the financing in order for NIFA or another approved issuer to issue the bonds. Allocations are issued based on NIFA guidelines and the Executive Order of the Governor. An application for Volume Cap Allocation must be submitted to NIFA. 

View Volume Cap Allocation Application Form 

Note: There are limited private activity volume cap allocations. If the volume cap is exhausted for the year when you apply, no allocation will be issued, and the financing cannot be approved during that year. The NIFA Staff and Board will review allocation requests according to the Allocation Plan for Private Activity Volume Cap with 4% LIHTCs.

Application & Fees

Your eligibility for the proposed housing project financing is based on the factors affecting the security of NIFA bonds and compliance with the public purpose provisions of the NIFA Act. Applications must be received based on the dates in the Allocation Plan for Private Activity Volume Cap with 4% LIHTCs. 

The various fees associated with the Multifamily Financing program are outlined in the Fee Schedule section of the Allocation Plan for Private Activity Volume Cap with 4% LIHTCs.

View the Allocation Plan for 4% LIHTC and Bond Developments