### Question
How does Computation of Taxable Income define qualified 501(c)(3) bond?


### Answer
Under *26 U.S.C. § 145*, **qualified 501(c)(3) bond** is defined as:

> any private activity bond issued as part of an issue if—


(1) all property which is to be provided by the net proceeds of the issue is to be owned by a 501(c)(3) organization or a governmental unit, and


(2) such bond would not be a private activity bond if—


(A) 501(c)(3) organizations were treated as governmental units with respect to their activities which do not constitute unrelated trades or businesses, determined by applying section 513(a), and


(B) paragraphs (1) and (2) of section 141(b) were applied by substituting "5 percent" for "10 percent" each place it appears and by substituting "net proceeds" for "proceeds" each place it appears

#### Citation:
  - *26 U.S.C. § 145*
  - Heading: **Subtitle A-Income Taxes > CHAPTER 1-NORMAL TAXES AND SURTAXES > Subchapter B-Computation of Taxable Income > PART IV-TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS > Subpart A-Private Activity Bonds**

