January 30, 2019
Tax-Exempt Bonds: A Quick Guide to Management Contracts
When a facility is financed with the proceeds of governmental bonds or qualified 501(c)(3) bonds, the facility is subject to certain limits on private business use. Private business use can result from a number of different arrangements, including a management contract, incentive pay contract, operation or service contract involving all, a portion of, or any function of the facility (a “Management Contract”). For example, with respect to a bond-financed hospital, a contract to provide management services for the entire hospital, a contract for management services for a specific department of the hospital, and an incentive payment contract for physician services to patients of the hospital are each treated as a Management Contract.