§ 141. Private activity bond; qualified bond
(a)
Private activity bond
For purposes of this title, the term “private activity bond” means any bond issued as part of an issue—
(b)
Private business tests
(1)
Private business use test
Except as otherwise provided in this subsection, an issue meets the test of this paragraph if more than 10 percent of the proceeds of the issue are to be used for any private business use.
(2)
Private security or payment test
Except as otherwise provided in this subsection, an issue meets the test of this paragraph if the payment of the principal of, or the interest on, more than 10 percent of the proceeds of such issue is (under the terms of such issue or any underlying arrangement) directly or indirectly—
(3)
5 percent test for private business use not related or disproportionate to government use financed by the issue
(A)
In general
An issue shall be treated as meeting the tests of paragraphs (1) and (2) if such tests would be met if such paragraphs were applied—
(B)
Disproportionate related business use proceeds
For purposes of subparagraph (A), the disproportionate related business use proceeds of an issue is an amount equal to the aggregate of the excesses (determined under the following sentence) for each private business use of the proceeds of an issue which is related to a government use of such proceeds. The excess determined under this sentence is the excess of—
(4)
Lower limitation for certain output facilities
An issue 5 percent or more of the proceeds of which are to be used with respect to any output facility (other than a facility for the furnishing of water) shall be treated as meeting the tests of paragraphs (1) and (2) if the nonqualified amount with respect to such issue exceeds the excess of—
(B)
the aggregate nonqualified amounts with respect to all prior tax-exempt issues 5 percent or more of the proceeds of which are or will be used with respect to such facility (or any other facility which is part of the same project).
There shall not be taken into account under subparagraph (B) any bond which is not outstanding at the time of the later issue or which is to be redeemed (other than in an advance refunding) from the net proceeds of the later issue.
(5)
Coordination with volume cap where nonqualified amount exceeds $15,000,000
If the nonqualified amount with respect to an issue—
(B)
does not exceed the amount which would cause a bond which is part of such issue to be treated as a private activity bond without regard to this paragraph,
such bond shall nonetheless be treated as a private activity bond unless the issuer allocates a portion of its volume cap under section
146 to such issue in an amount equal to the excess of such nonqualified amount over $15,000,000.
(6)
Private business use defined
(A)
In general
For purposes of this subsection, the term “private business use” means use (directly or indirectly) in a trade or business carried on by any person other than a governmental unit. For purposes of the preceding sentence, use as a member of the general public shall not be taken into account.
(8)
Nonqualified amount
For purposes of this subsection, the term “nonqualified amount” means, with respect to an issue, the lesser of—
(9)
Exception for qualified 501(c)(3) bonds
There shall not be taken into account under this subsection or subsection (c) the portion of the proceeds of an issue which (if issued as a separate issue) would be treated as a qualified 501(c)(3) bond if the issuer elects to treat such portion as a qualified 501(c)(3) bond.
(c)
Private loan financing test
(1)
In general
An issue meets the test of this subsection if the amount of the proceeds of the issue which are to be used (directly or indirectly) to make or finance loans (other than loans described in paragraph (2)) to persons other than governmental units exceeds the lesser of—
(d)
Certain issues used to acquire nongovernmental output property treated as private activity bonds
(1)
In general
For purposes of this title, the term “private activity bond” includes any bond issued as part of an issue if the amount of the proceeds of the issue which are to be used (directly or indirectly) for the acquisition by a governmental unit of nongovernmental output property exceeds the lesser of—
(2)
Nongovernmental output property
Except as otherwise provided in this subsection, for purposes of paragraph (1), the term “nongovernmental output property” means any property (or interest therein) which before such acquisition was used (or held for use) by a person other than a governmental unit in connection with an output facility (within the meaning of subsection (b)(4)) (other than a facility for the furnishing of water). For purposes of the preceding sentence, use (or the holding for use) before October 14, 1987, shall not be taken into account.
(3)
Exception for property acquired to provide output to certain areas
For purposes of paragraph (1)—
(A)
In general
The term “nongovernmental output property” shall not include any property which is to be used in connection with an output facility 95 percent or more of the output of which will be consumed in—
(B)
Definitions
For purposes of subparagraph (A)—
(i)
Qualified service area
The term “qualified service area” means, with respect to the governmental unit acquiring the property, any area throughout which such unit provided (at all times during the 10-year period ending on the date such property is acquired by such unit) output of the same type as the output to be provided by such property. For purposes of the preceding sentence, the period before October 14, 1987, shall not be taken into account.
(ii)
Qualified annexed area
The term “qualified annexed area” means, with respect to the governmental unit acquiring the property, any area if—
(I)
such area is contiguous to, and annexed for general governmental purposes into, a qualified service area of such unit,
(C)
Limitation on size of annexed area not to apply where output capacity does not increase by more than 10 percent
Subclause (III) of subparagraph (B)(ii) shall not apply to an annexation of an area by a governmental unit if the output capacity of the property acquired in connection with the annexation, when added to the output capacity of all other property which is not treated as nongovernmental output property by reason of subparagraph (A)(ii) with respect to such annexed area, does not exceed 10 percent of the output capacity of the property providing output of the same type to the qualified service area into which it is annexed.
(D)
Rules for determining relative size, etc.
For purposes of subparagraphs (B)(ii) and (C)—
(4)
Exception for property converted to nonoutput use
For purposes of paragraph (1)—
(5)
Special rules
In the case of a bond which is a private activity bond solely by reason of this subsection—
(A)
subsections (c) and (d) of section
147 (relating to limitations on acquisition of land and existing property) shall not apply, and
(e)
Qualified bond
For purposes of this part, the term “qualified bond” means any private activity bond if—
(3)
Other requirements
Such bond meets the applicable requirements of each subsection of section
147.
[1] So in original. Probably should end with a period after “146”.