Small Block

Capital Absorption Opportunity

Entities and mechanisms that receive capital and put it to use in a place.

Federal funding and tax credits

  • AwardsIn federal spending law, a "Federal award" covers both financial assistance (grants, subgrants, loans, awards, cooperative agreements and other assistance) and procurement (contracts, subcontracts, purchase orders, task orders and delivery orders). Congress required these awards to be published on a single searchable public website, excluding individual transactions below $25,000.
  • GrantsA federal grant is the agreement an executive agency must use when its main purpose is to transfer a thing of value to a state, local government or other recipient to carry out a public purpose authorized by federal law, instead of buying property or services, and substantial federal involvement is not expected. When substantial involvement is expected, the agency must use a cooperative agreement instead.
  • Historic Tax CreditsFor the owner of a certified historic structure, the rehabilitation credit, 20 percent of qualified rehabilitation expenditures taken over five years, can be turned into project capital. An investor typically contributes equity in exchange for the right to claim the credit.
  • New Markets Tax CreditsFor a business or project in a low-income community, the new markets tax credit is a source of capital: a qualified community development entity must put substantially all of its investors' cash into qualified low-income community investments, such as "any capital or equity investment in, or loan to, any qualified active low-income community business."
  • Tax Credit Equity Investors and PlacementsFor a project sponsor, a tax credit equity placement converts federal credits the project generates into up-front equity: investors pay in cash for the right to claim the low-income housing credit, the new markets tax credit through a qualified community development entity, or the historic rehabilitation credit. In exchange, the project takes on the credits' compliance obligations, such as the 15-year low-income housing compliance period.

Community lenders

  • Certified Development Companies and SBA 504 Loans (CDCs)A certified development company (CDC) is an entity the Small Business Administration authorizes to deliver 504 financing to small businesses. In a typical 504 project, the business puts in at least 10 percent, a CDC loan funded by an SBA-guaranteed debenture covers up to 40 percent, and a private lender covers the rest.
  • Commercial Banks and Trust CompaniesA commercial bank takes deposits and makes loans under a national charter, first granted under the National Currency Act of 1864, or a state charter; a trust company is chartered mainly to manage property as a fiduciary. Deposit-taking banks and trust companies can be FDIC-insured, and under the Community Reinvestment Act regulators assess each bank's record of meeting the credit needs of its entire community, including low- and moderate-income neighborhoods.
  • Community Development Financial Institutions (CDFIs)A community development financial institution (CDFI) is a lender or investor, other than an individual or a government agency, whose primary mission is community development, that serves a defined investment area or targeted population and stays accountable to its residents. For a borrower or project, a CDFI is a source of loans, equity and development services from an institution organized to serve that community.
  • Credit UnionsA federal credit union is a cooperative association, owned by its members, organized to promote thrift among them and to create a source of credit for provident or productive purposes. Credit unions can also be chartered under state law; for a borrower, a credit union lends to its members, so access depends on fitting its field of membership.

Public and tribal bodies

  • Federal and Municipal Appropriations and AgenciesAn appropriation is a law that lets a government agency spend public money for stated purposes; under federal law a statute counts as an appropriation only if it specifically says so, and officials may not obligate or spend more than an appropriation provides. Federal agencies absorb capital through annual and permanent appropriations and pass much of it on as grants, loans and contracts; municipal appropriations are adopted by city, county and other local governing bodies under state and local law.
  • Local MunicipalitiesA municipality is a city, town, village or similar local government incorporated under state law; federal law does not create or define it. Interest on bonds issued by a state or a political subdivision such as a municipality is generally excluded from federal gross income, which lets municipalities borrow at tax-exempt rates, though bonds whose proceeds go more than 10 percent to private business use lose that exclusion unless they are qualified bonds.
  • Public Housing Agencies and Operating Subsidies (PHAs)A public housing agency (PHA) is a state, county, municipality or other governmental entity or public body authorized to develop or administer low-rent public housing. HUD pays PHAs operating subsidies from the Operating Fund, set up by the Quality Housing and Work Responsibility Act of 1998 to help pay for operating and managing public housing.
  • Quasi-Governmental Entities and AgenciesA quasi-governmental entity is a body created or sponsored by government that operates with some independence from it, such as a government corporation, a government-sponsored enterprise or a state or local public authority; the label has no single legal definition. Federal law sorts federal government corporations into wholly owned and mixed-ownership corporations and lets an agency establish or acquire a corporation only under a law specifically authorizing it.
  • Redevelopment Agencies and AuthoritiesA redevelopment agency or authority is a public body created under state law to acquire, clear and redevelop land in areas a local government designates as blighted. Title I of the Housing Act of 1949 funded such "local public agencies" for slum clearance and redevelopment, and federal tax law allows tax-exempt qualified redevelopment bonds for that work.
  • Sovereign Tribal Governments and Native American TribesA federally recognized tribe is an Indian or Alaska Native tribe, band, nation, pueblo, village or community that the Secretary of the Interior acknowledges and lists each year; the United States maintains a government-to-government relationship with these tribes and recognizes their sovereignty. For specific federal tax purposes, including deductible charitable contributions and, within limits, tax-exempt bonds, a tribal government is treated as a state.
  • Special Purpose DistrictsA special purpose district is a unit of local government created under state law to provide one or a few services, such as water, sewer, fire protection, drainage, schools or ports, often with its own power to tax, levy assessments or charge fees. For federal tax-exempt bond interest, Treasury treats such a district as a political subdivision only if it is a municipal corporation or has been delegated part of a state or local government's sovereign power.

Place-based mechanisms

  • Economic Development Corporations (EDCs)An economic development corporation (EDC) is a public, nonprofit or public-private body formed under state or local law to attract and finance business investment for a city, county or region, often by owning land, making loans or managing incentives. The Public Works and Economic Development Act, as rewritten in 1998, defines the recipients of Economic Development Administration assistance to include cities and other political subdivisions and public or private nonprofit organizations acting in cooperation with officials of a political subdivision, categories that cover many EDCs.
  • Land BanksA land bank is a public entity or nonprofit created under state or local law to acquire vacant, abandoned or tax-foreclosed property, hold it, clear its title and return it to productive use. The Housing and Economic Recovery Act of 2008 listed establishing land banks for foreclosed homes among the permitted uses of the $4 billion it appropriated to states and local governments for redeveloping abandoned and foreclosed homes.
  • Land Trusts and Community Land Trusts (CLTs)A land trust is a nonprofit, formed under state law, that holds land or conservation easements to protect it; a community land trust (CLT) keeps land permanently and leases it so the homes or buildings on it stay affordable. Congress defined a CLT for federal housing programs as an organization that holds land in perpetuity for long-term ground leases, transfers the buildings to the lessees, and keeps an option to buy them back at a price that keeps them affordable.
  • Qualified Opportunity Zone Businesses (QOZBs)A qualified opportunity zone business (QOZB) is a trade or business that a qualified opportunity fund invests in through stock or a partnership interest; substantially all of its tangible property must be qualified opportunity zone business property, and it must meet active-business tests and avoid excluded businesses such as golf courses, casinos and liquor stores. The 2025 amendments added annual reporting from these businesses to their funds and lowered the substantial-improvement threshold to 50 percent of adjusted basis for property in zones comprised entirely of a "rural area" as the law defines it.
  • Tax Increment Financing Revenues (TIF)Tax increment financing (TIF) is a state-law tool that lets a local government or redevelopment agency pledge the growth in property tax revenue (and, in some states, sales tax revenue) inside a district to pay for improvements or development costs there. Under federal tax law, a qualified redevelopment bond, a tax-exempt bond for redevelopment in a designated blighted area under state law, may be repaid from the increase in real property tax revenue the redevelopment produces if that increase is reserved exclusively for debt service.

Tax-exempt organizations (26 U.S.C. § 501)

  • 501(c) OrganizationsOrganizations listed in section 501(c) of the Internal Revenue Code, which section 501(a) exempts from federal income tax, while section 501(b) still taxes their unrelated business income. The list first appeared in the Internal Revenue Code of 1954, which the Tax Reform Act of 1986 redesignated as the Internal Revenue Code of 1986.
    • 501(c)(1) OrganizationsCorporations organized under an Act of Congress that are instrumentalities of the United States; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(2) OrganizationsTitle-holding corporations: corporations organized to hold title to property, collect its income, and turn the whole amount, less expenses, over to an organization that is itself exempt under section 501; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(3) OrganizationsCorporations, community chests, funds, and foundations organized and operated exclusively for religious, charitable, scientific, testing for public safety, literary, or educational purposes, or for the prevention of cruelty to children or animals, with limits on private benefit, lobbying, and political campaign activity; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(4) OrganizationsCivic leagues and organizations not organized for profit but operated exclusively for the promotion of social welfare, and certain local associations of employees; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(5) OrganizationsLabor, agricultural, and horticultural organizations; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(6) OrganizationsBusiness leagues, chambers of commerce, real-estate boards, and boards of trade that are not organized for profit and whose net earnings do not benefit any private shareholder or individual; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(7) OrganizationsSocial clubs: clubs organized for pleasure, recreation, and other nonprofitable purposes whose net earnings do not benefit any private shareholder; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(8) OrganizationsFraternal beneficiary societies, orders, or associations that operate under the lodge system and provide life, sick, accident, or other benefits to members or their dependents; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(9) OrganizationsVoluntary employees' beneficiary associations (VEBAs) that provide life, sick, accident, or other benefits to members or their dependents; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(10) OrganizationsDomestic fraternal societies, orders, or associations operating under the lodge system whose net earnings go exclusively to religious, charitable, scientific, literary, educational, and fraternal purposes, and which do not pay life, sick, accident, or other benefits. The 1954 Code's paragraph (10) covered a different group, beneficiary associations of federal employees, until the Tax Reform Act of 1969 replaced it with this text.
    • 501(c)(11) OrganizationsTeachers' retirement fund associations of a purely local character whose income comes only from public taxation, assessments on members' teaching salaries, and investments; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(12) OrganizationsBenevolent life insurance associations of a purely local character, mutual ditch or irrigation companies, mutual or cooperative telephone companies, and like organizations, if 85 percent or more of their income is collected from members to meet losses and expenses; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(13) OrganizationsCemetery companies owned and operated exclusively for their members or not operated for profit, and corporations chartered solely for burial, whose net earnings do not benefit any private shareholder or individual; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(14) OrganizationsCredit unions without capital stock organized and operated for mutual purposes and without profit, plus certain nonprofit funds that insure shares or deposits in savings institutions; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(15) OrganizationsSmall insurance companies other than life insurers, under a paragraph that has been in the Code since its 1954 enactment, when it covered only mutual companies other than life or marine insurers. Since 2004 the test is gross receipts of no more than $600,000 for the year with more than half from premiums, or, for a mutual company, gross receipts of no more than $150,000 with more than 35 percent from premiums.
    • 501(c)(16) OrganizationsCrop-financing corporations organized by a farmers' cooperative association or its members to finance the ordinary crop operations of members or other producers, and operated with that association; the paragraph has been in the Code since its 1954 enactment.
    • 501(c)(17) OrganizationsSupplemental unemployment benefit (SUB) trusts: trusts forming part of a plan that pays supplemental unemployment compensation benefits to employees on a nondiscriminatory basis. Congress added the paragraph in 1960.
    • 501(c)(18) OrganizationsTrusts created before June 25, 1959, that form part of a pension plan funded only by employee contributions. The Tax Reform Act of 1969 added the paragraph.
    • 501(c)(19) OrganizationsVeterans' organizations: posts or organizations of past or present members of the United States Armed Forces, and their auxiliary units, societies, trusts, or foundations, organized in the United States or its possessions, at least 75 percent of whose members are past or present members of the Armed Forces. Congress added the paragraph in 1972 for posts or organizations of "war veterans" and in 1982 replaced that term with past or present members of the Armed Forces.
    • 501(c)(20) OrganizationsFormer category for an organization or trust whose exclusive function was to form part of a qualified group legal services plan under section 120; the Tax Reform Act of 1976 added it, applying to taxable years beginning after December 31, 1976, and ending before January 1, 1982. The Tax Increase Prevention Act of 2014 struck paragraph (20) from section 501(c), which the Code now shows as repealed.
    • 501(c)(21) OrganizationsBlack lung benefit trusts: trusts set up in writing by a person (other than an insurance company) exclusively to satisfy its liability for disability or death claims due to pneumoconiosis under the Black Lung Acts, pay insurance premiums covering that liability, and pay the trust's administrative costs. The Black Lung Benefits Revenue Act of 1977 added the paragraph.
    • 501(c)(22) OrganizationsWithdrawal liability payment funds: trusts established in writing by the plan sponsors of multiemployer pension plans exclusively to pay amounts described in ERISA section 4223(c) or (h) and the trust's reasonable administrative expenses. The Multiemployer Pension Plan Amendments Act of 1980 added the paragraph.
    • 501(c)(23) OrganizationsAssociations organized before 1880 more than 75 percent of whose members are present or past members of the Armed Forces, with a principal purpose of providing insurance and other benefits to veterans or their dependents. The Tax Equity and Fiscal Responsibility Act of 1982 added the paragraph with a 25-percent threshold, and the Technical Corrections Act of 1982 raised it to 75 percent.
    • 501(c)(24) OrganizationsA trust described in ERISA section 4049 as in effect on April 7, 1986: trusts for terminated single-employer pension plans, which the Single-Employer Pension Plan Amendments Act of 1986 created along with this paragraph. The Omnibus Budget Reconciliation Act of 1987 repealed section 4049 for plan terminations noticed or started after December 17, 1987, but paragraph (24) remains in section 501(c), still pointing to section 4049 as it stood in 1986.
    • 501(c)(25) OrganizationsMultiple-parent title-holding companies: corporations or trusts with no more than 35 shareholders or beneficiaries and one class of stock or interest, organized exclusively to acquire, hold title to, and collect income from real property and remit that income, less expenses, to qualified pension plans, governmental plans, governmental units, or section 501(c)(3) organizations that own them. The Tax Reform Act of 1986 added the paragraph.
    • 501(c)(26) OrganizationsState-sponsored high-risk health coverage organizations: membership organizations established by a state exclusively to provide not-for-profit medical care coverage to state residents who, because of a medical condition, cannot get coverage or can get it only at substantially higher rates. The Health Insurance Portability and Accountability Act of 1996 added the paragraph.
    • 501(c)(27) OrganizationsState-sponsored workers' compensation organizations: membership organizations established by a state before June 1, 1996, to reimburse members for losses under workmen's compensation acts, and organizations, including mutual insurance companies, created by state law to provide workmen's compensation insurance.
    • 501(c)(28) OrganizationsThe National Railroad Retirement Investment Trust established under section 15(j) of the Railroad Retirement Act of 1974. The Railroad Retirement and Survivors' Improvement Act of 2001 added the paragraph.
    • 501(c)(29) OrganizationsCO-OP health insurance issuers: qualified nonprofit health insurance issuers that received a loan or grant under the Affordable Care Act's CO-OP program, for periods in which they comply with that program's requirements. The Patient Protection and Affordable Care Act added the paragraph.
  • Cooperative Hospital Service Organizations (§ 501(e))A section 501(e) organization is a cooperative owned by two or more tax-exempt or government hospitals that performs shared services for them on a centralized basis, such as data processing, purchasing, billing and collection, laboratory, or personnel services. It must operate on a cooperative basis, paying out all net earnings to its patron hospitals in proportion to the services it performed for them, and Congress treats it as an organization operated exclusively for charitable purposes.
  • Cooperative Service Organizations of Operating Educational Organizations (§ 501(f))A section 501(f) organization is a cooperative investment pool whose members are schools, colleges, and universities (or their state-affiliated support organizations) that are tax-exempt or whose income is excluded as governmental; it collectively invests the members' contributed money in stocks and securities and pays all of the income, less expenses, back to them. Congress treats it as an organization operated exclusively for charitable purposes.
  • Religious and Apostolic Organizations (§ 501(d))A section 501(d) organization is a religious or apostolic association or corporation, such as a communal religious community, whose members share a common or community treasury and which may run a business for their common benefit. The organization itself is exempt from federal income tax, but each member must include a pro rata share of its taxable income in their own gross income, treated as a dividend, whether or not it is distributed.

Business entity forms

  • B-Corps and Social Purpose CorporationsA benefit corporation is a for-profit corporation, formed under a state benefit-corporation statute, whose directors must weigh a stated public benefit alongside shareholder returns; a social purpose corporation is a similar state-law form, and a Certified B Corporation is a private certification by the nonprofit B Lab, not a legal form. No federal law creates any of these labels: for federal tax, a benefit or social purpose corporation is an ordinary corporation, taxed at the 21 percent corporate rate unless it elects S status.
  • C Corporations: Domestic, Foreign, and Common Stock (C-Corps)A C corporation is any corporation that is not an S corporation for the year, so the corporation itself pays federal income tax on its profits, at a flat 21 percent rate. It is domestic if created or organized in the United States or under federal or state law, and foreign otherwise; common stock is its ordinary ownership share.
  • Co-opsA cooperative is a business formed under state law that is owned and controlled by the people who use it and returns its earnings to them in proportion to their use (patronage). Under Subchapter T of the Internal Revenue Code, a cooperative may deduct the patronage dividends it pays, so those earnings are taxed to the members instead of the co-op.
  • Individual Sole ProprietorsA sole proprietor is an individual who owns and runs an unincorporated business directly, with no legal separation between the owner and the business, so the owner is personally liable for its debts. For federal tax purposes the business is not a separate taxpayer: its profit is reported on the owner's individual return (Schedule C) and is subject to self-employment tax, the Social Security and Medicare tax on the self-employed.
  • Limited Liability Companies, Including Series and Single-Member Disregarded Entities (LLCs)A limited liability company is a state-law entity whose members are generally shielded from its debts; no federal statute creates it, and Treasury regulations decide how it is taxed. Unless it elects otherwise, an LLC with two or more members is taxed as a partnership, and a single-member LLC is disregarded as separate from its owner.
  • Limited Liability Limited Partnerships (LLLPs)A limited liability limited partnership is a state-law limited partnership that has elected to shield its general partners, as well as its limited partners, from personal liability for the partnership's obligations. No federal law creates it; for federal tax purposes it is classified like any limited partnership, taxed as a partnership by default, so the entity pays no income tax and each partner is taxed on a share of its income.
  • Limited Liability Partnerships (LLPs)A limited liability partnership is a state-law general partnership that has registered with the state so that its partners are not personally liable for certain partnership obligations, typically other partners' malpractice and, in many states, partnership debts generally; professional firms such as law and accounting firms commonly use it. No federal law creates it; for federal tax purposes it is taxed as a partnership by default, meaning the firm pays no income tax and each partner is taxed on a share of its income.
  • Professional Corporations and Professional Limited Liability Companies (PCs and PLLCs)A professional corporation (PC) or professional limited liability company (PLLC) is a state-law entity that licensed professionals, such as physicians, lawyers, or accountants, may use to practice; state law usually limits ownership to licensees and does not shield a professional from liability for their own malpractice. For federal tax purposes a PC is a corporation taxed at the same flat 21 percent rate as other C corporations unless it elects S status, while a PLLC is classified like any LLC: a partnership if it has two or more members and disregarded if it has one, unless it elects otherwise.
  • S Corporations and Common Stock (S-Corps)An S corporation is a state-law corporation that has elected under Subchapter S to pass its income, losses, and credits through to its shareholders, so the corporation generally pays no federal income tax itself. It may have no more than 100 shareholders and only one class of stock, so it issues common stock; shares that differ only in voting rights still count as one class.

Trusts and estates

  • Estate of a Deceased PersonA decedent's estate is the property a person leaves at death, administered under state probate law by an executor or administrator who pays debts and distributes what remains to heirs. Federally, the estate is a separate income taxpayer on income earned during administration, and it may owe estate tax on the transfer of the taxable estate; for people dying after 2025 the basic exclusion amount is $15,000,000, adjusted for inflation for deaths after 2026.
  • Statutory and Common Law TrustsA trust is an arrangement in which a trustee holds legal title to property for the benefit of beneficiaries; a common law trust arises under judge-made trust law, while a statutory trust (such as a Delaware statutory trust) is created under a state statute and is often used to hold investment real estate or pooled assets. For federal tax purposes an arrangement to protect or conserve property for beneficiaries is a trust, but one used mainly to carry on a profit-making business is classified as a business entity instead, and an ordinary trust is itself a federal income taxpayer.