Tax Exempt Lease Purchase
A tax-exempt municipal lease, also known as a lease-purchase agreement, is a contract that enables local Government Agencies to acquire equiment deemed as essential use equipment, such as emergency, fire apparatus, fire boats and public safety equipment, law enforcement, fire fighting and EMS helicopters and fixed wing aircraft and mission equipment, modular building, school buses and vehicles, computer networking and software, 911 consoles and systems, communications, asphalt, paving, and street sweepers, as well as many other types of equipment used by a municipal, county, or state governmental agency.
In a tax exempt municipal lease, the government entity has a “non-appropriation of funds” clause in the agreement. This clause serves as the basis for a municipal lease not violating the public debt limitations that typically require voter approval for a municipality to enter into a long-term debt obligation.
Municipal Equipment Leasing is a lower cost alternative to traditional bond financing.
In addition the tax-exempt municipal lease offers government entities a wide range of benefits in procuring essential assets, such as:
- Low, tax-exempt interest rates.
- Increasing equity with every payment, resulting in complete ownership and clear title to the equipment at the end of the term.
- Lease payments that are considered an operating expense, not long-term debt, thereby providing an avenue to ownership upon payment of $1 at the end of the chosen term therefore that does not create a debt obligation.
- An alternative to the high issuance cost bond market and the time and complexity of obtaining voter approval for a bond issue.
- An early payoff option to prepay the contract throughout the term for a pre-determined purchase price.
- Payment structured to meet the lesse’s cash flow and budgetary requirements which includes your choice of annual,semi-annual, quarterly or monthly basis.
Who Qualifies For Tax-Exempt Municipal Leasing?
Section 103 of the Internal Revenue Code allows certain municipal entities to obtain financing at lower rates than what is available to commercial and industrial businesses. That is because the interest eared by the Lessor is exempt from federal income taxes. The following entities qualify for tax-exempt financing:
- State, County and Municipal Governments and their Political Sub Divisions
- State Colleges and Universities
- Community Colleges
- Public School Districts
- Public Authorities and Districts
- State, County or Municipal Hospitals
- Hospital Districts
Sun South Equipment Leasings’ flexible, custom-tailored and competitive leasing programs open doors to expansion, growth, increased productivity and profit for businesses in virtually any industry.