Tax-Exempt Revenue Bonds

Term Paper # 100136

Accounting
Business > Finance, Investment and Banking
Medical and Health

This paper discusses long-term debt financing alternatives for hospitals.

1,179 words () | 8 sources | MLA | 2007 United States

Paper Summary:

The paper explores the best course of action in acquiring sources of long-term capital for hospitals. The paper examines how hospitals use tax-exempt revenue bonds as opposed to taxable bonds. The paper concludes that tax-exempt revenue bonds seem to be the best option as an alternative for long-term debt financing for hospitals.

From the Paper:

"The term tax-exempt revenue bond may be defined as any bond whose interest is not subject to taxation through one or more authority. The lower cost of capital is considerably more striking to healthcare providers who qualify. On the other hand, taxable bonds was used prior to tax-exempt revenue bonds; "it is a debt security whose return to the investor is subject to taxes at the local, state, or federal level" (Nowicki, 2004, p. 12)."
"According to Hassan et al. (2000) a study suggested that "hospitals using tax-exempt rather than taxable debt are forced to provide higher levels of charity care as a condition of gaining access to the tax-exempt market" (Hassan et al., 2000, p. 47). In addition, Gentry and Penrod (2000) stated that "tax provisions for not-for-profit (NFP) hospitals--both income and property taxes--issue tax-exempt bonds so lenders do not pay income taxes on interest received" (Gentry and Penrod, 2000, p. 285)."

Sample of Sources Used:

Davis, R.L. and Davis, A. (2001). Nonprofit Corporations: Finance Structure and Documentation. Chicago: Orrick, Herrington, & Sutcliffe, 31-32.
Gentry, W.N. and Penrod, J.R. (2000). The Tax Benefits of Not-for-Profit Hospitals. National Bureau of Economic Research. 285-324.
Goeppele, H.A. (1984). Taxable or tax-exempt? When taxable financing is the better way. Healthcare Financing Management, 38(5): 50-60.
Hassan, M., Wedig, G.J. and Morrisey, M.A. (2000). Charity Care by Non-profit hospitals: The price of tax-exempt Debt. International Journal of the Economics of Business, 7(1): 47-62.
Kosnett, J.R. (2006). The Good News in Bonds. Kiplinger.com. Retrieved November 2, 2006 from, www.kiplinger.com/columns/balance/archive/2006/balance0306.html