§ 142. Exempt facility bond
(a)
General rule
For purposes of this part, the term “exempt facility bond” means any bond issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide—
(b)
Special exempt facility bond rules
For purposes of subsection (a)—
(1)
Certain facilities must be governmentally owned
(A)
In general
A facility shall be treated as described in paragraph (1), (2), (3), or (12) of subsection (a) only if all of the property to be financed by the net proceeds of the issue is to be owned by a governmental unit.
(B)
Safe harbor for leases and management contracts
For purposes of subparagraph (A), property leased by a governmental unit shall be treated as owned by such governmental unit if—
(i)
the lessee makes an irrevocable election (binding on the lessee and all successors in interest under the lease) not to claim depreciation or an investment credit with respect to such property,
(ii)
the lease term (as defined in section
168
(i)(3)) is not more than 80 percent of the reasonably expected economic life of the property (as determined under section
147
(b)), and
(iii)
the lessee has no option to purchase the property other than at fair market value (as of the time such option is exercised).
Rules similar to the rules of the preceding sentence shall apply to management contracts and similar types of operating agreements.
(c)
Airports, docks and wharves, mass commuting facilities and high-speed intercity rail facilities
For purposes of subsection (a)—
(1)
Storage and training facilities
Storage or training facilities directly related to a facility described in paragraph (1), (2), (3) or (11) of subsection (a) shall be treated as described in the paragraph in which such facility is described.
(2)
Exception for certain private facilities
Property shall not be treated as described in paragraph (1), (2), (3) or (11) of subsection (a) if such property is described in any of the following subparagraphs and is to be used for any private business use (as defined in section
141
(b)(6)).
(B)
Any retail facility (including food and beverage facilities) in excess of a size necessary to serve passengers and employees at the exempt facility.
(C)
Any retail facility (other than parking) for passengers or the general public located outside the exempt facility terminal.
(d)
Qualified residential rental project
For purposes of this section—
(1)
In general
The term “qualified residential rental project” means any project for residential rental property if, at all times during the qualified project period, such project meets the requirements of subparagraph (A) or (B), whichever is elected by the issuer at the time of the issuance of the issue with respect to such project:
(A)
20–50 test
The project meets the requirements of this subparagraph if 20 percent or more of the residential units in such project are occupied by individuals whose income is 50 percent or less of area median gross income.
(B)
40–60 test
The project meets the requirements of this subparagraph if 40 percent or more of the residential units in such project are occupied by individuals whose income is 60 percent or less of area median gross income.
For purposes of this paragraph, any property shall not be treated as failing to be residential rental property merely because part of the building in which such property is located is used for purposes other than residential rental purposes.
(2)
Definitions and special rules
For purposes of this subsection—
(A)
Qualified project period
The term “qualified project period” means the period beginning on the 1st day on which 10 percent of the residential units in the project are occupied and ending on the latest of—
(i)
the date which is 15 years after the date on which 50 percent of the residential units in the project are occupied,
(B)
Income of individuals; area median gross income
(i)
In general
The income of individuals and area median gross income shall be determined by the Secretary in a manner consistent with determinations of lower income families and area median gross income under section 8 of the United States Housing Act of 1937 (or, if such program is terminated, under such program as in effect immediately before such termination). Determinations under the preceding sentence shall include adjustments for family size. Subsections (g) and (h) of section
7872 shall not apply in determining the income of individuals under this subparagraph.
(ii)
Special rule relating to basic housing allowances
For purposes of determining income under this subparagraph, payments under section
403 of title
37, United States Code, as a basic pay allowance for housing shall be disregarded with respect to any qualified building.
(iii)
Qualified building
For purposes of clause (ii), the term “qualified building” means any building located—
(I)
in any county in which is located a qualified military installation to which the number of members of the Armed Forces of the United States assigned to units based out of such qualified military installation, as of June 1, 2008, has increased by not less than 20 percent, as compared to such number on December 31, 2005, or
(C)
Students
Rules similar to the rules of 42(i)(3)(D) [1] shall apply for purposes of this subsection.
(D)
Single-room occupancy units
A unit shall not fail to be treated as a residential unit merely because such unit is a single-room occupancy unit (within the meaning of section
42).
(E)
Hold harmless for reductions in area median gross income
(i)
In general
Any determination of area median gross income under subparagraph (B) with respect to any project for any calendar year after 2008 shall not be less than the area median gross income determined under such subparagraph with respect to such project for the calendar year preceding the calendar year for which such determination is made.
(ii)
Special rule for certain census changes
In the case of a HUD hold harmless impacted project, the area median gross income with respect to such project for any calendar year after 2008 (hereafter in this clause referred to as the current calendar year) shall be the greater of the amount determined without regard to this clause or the sum of—
(I)
the area median gross income determined under the HUD hold harmless policy with respect to such project for calendar year 2008, plus
(II)
any increase in the area median gross income determined under subparagraph (B) (determined without regard to the HUD hold harmless policy and this subparagraph) with respect to such project for the current calendar year over the area median gross income (as so determined) with respect to such project for calendar year 2008.
(iii)
HUD hold harmless policy
The term “HUD hold harmless policy” means the regulations under which a policy similar to the rules of clause (i) applied to prevent a change in the method of determining area median gross income from resulting in a reduction in the area median gross income determined with respect to certain projects in calendar years 2007 and 2008.
(iv)
HUD hold harmless impacted project
The term “HUD hold harmless impacted project” means any project with respect to which area median gross income was determined under subparagraph (B) for calendar year 2007 or 2008 if such determination would have been less but for the HUD hold harmless policy.
(3)
Current income determinations
For purposes of this subsection—
(A)
In general
The determination of whether the income of a resident of a unit in a project exceeds the applicable income limit shall be made at least annually on the basis of the current income of the resident. The preceding sentence shall not apply with respect to any project for any year if during such year no residential unit in the project is occupied by a new resident whose income exceeds the applicable income limit.
(B)
Continuing resident’s income may increase above the applicable limit
If the income of a resident of a unit in a project did not exceed the applicable income limit upon commencement of such resident’s occupancy of such unit (or as of any prior determination under subparagraph (A)), the income of such resident shall be treated as continuing to not exceed the applicable income limit. The preceding sentence shall cease to apply to any resident whose income as of the most recent determination under subparagraph (A) exceeds 140 percent of the applicable income limit if after such determination, but before the next determination, any residential unit of comparable or smaller size in the same project is occupied by a new resident whose income exceeds the applicable income limit.
(4)
Special rule in case of deep rent skewing
(A)
In general
In the case of any project described in subparagraph (B), the 2d sentence of subparagraph (B) of paragraph (3) shall be applied by substituting—
(B)
Deep rent skewed project
A project is described in this subparagraph if the owner of the project elects to have this paragraph apply and, at all times during the qualified project period, such project meets the requirements of clauses (i), (ii), and (iii):
(i)
The project meets the requirements of this clause if 15 percent or more of the low-income units in the project are occupied by individuals whose income is 40 percent or less of area median gross income.
(5)
Applicable income limit
For purposes of paragraphs (3) and (4), the term “applicable income limit” means—
(6)
Special rule for certain high cost housing area
In the case of a project located in a city having 5 boroughs and a population in excess of 5,000,000, subparagraph (B) of paragraph (1) shall be applied by substituting “25 percent” for “40 percent”.
(7)
Certification to Secretary
The operator of any project with respect to which an election was made under this subsection shall submit to the Secretary (at such time and in such manner as the Secretary shall prescribe) an annual certification as to whether such project continues to meet the requirements of this subsection. Any failure to comply with the provisions of the preceding sentence shall not affect the tax-exempt status of any bond but shall subject the operator to penalty, as provided in section
6652
(j).
(e)
Facilities for the furnishing of water
For purposes of subsection (a)(4), the term “facilities for the furnishing of water” means any facility for the furnishing of water if—
(1)
the water is or will be made available to members of the general public (including electric utility, industrial, agricultural, or commercial users), and
(2)
either the facility is operated by a governmental unit or the rates for the furnishing or sale of the water have been established or approved by a State or political subdivision thereof, by an agency or instrumentality of the United States, or by a public service or public utility commission or other similar body of any State or political subdivision thereof.
(f)
Local furnishing of electric energy or gas
For purposes of subsection (a)(8)—
(1)
In general
The local furnishing of electric energy or gas from a facility shall only include furnishing solely within the area consisting of—
(2)
Treatment of certain electric energy transmitted outside local area
(A)
In general
A facility shall not be treated as failing to meet the local furnishing requirement of subsection (a)(8) by reason of electricity transmitted pursuant to an order of the Federal Energy Regulatory Commission under section 211 or 213 of the Federal Power Act (as in effect on the date of the enactment of this paragraph) if the portion of the cost of the facility financed with tax-exempt bonds is not greater than the portion of the cost of the facility which is allocable to the local furnishing of electric energy (determined without regard to this paragraph).
(B)
Special rule for existing facilities
In the case of a facility financed with bonds issued before the date of an order referred to in subparagraph (A) which would (but for this subparagraph) cease to be tax-exempt by reason of subparagraph (A), such bonds shall not cease to be tax-exempt bonds (and section
150
(b)(4) shall not apply) if, to the extent necessary to comply with subparagraph (A)—
(3)
Termination of future financing
For purposes of this section, no bond may be issued as part of an issue described in subsection (a)(8) with respect to a facility for the local furnishing of electric energy or gas on or after the date of the enactment of this paragraph unless—
(4)
Election to terminate tax-exempt bond financing by certain furnishers
(A)
In general
In the case of a facility financed with bonds issued before the date of the enactment of this paragraph which would cease to be tax-exempt by reason of the failure to meet the local furnishing requirement of subsection (a)(8) as a result of a service area expansion, such bonds shall not cease to be tax-exempt bonds (and section
150
(b)(4) shall not apply) if the person engaged in such local furnishing by such facility makes an election described in subparagraph (B).
(B)
Election
An election is described in this subparagraph if it is an election made in such manner as the Secretary prescribes, and such person (or its predecessor in interest) agrees that—
(i)
such election is made with respect to all facilities for the local furnishing of electric energy or gas, or both, by such person,
(ii)
no bond exempt from tax under section
103 and described in subsection (a)(8) may be issued on or after the date of the enactment of this paragraph with respect to all such facilities of such person,
(g)
Local district heating or cooling facility
(1)
In general
For purposes of subsection (a)(9), the term “local district heating or cooling facility” means property used as an integral part of a local district heating or cooling system.
(2)
Local district heating or cooling system
(h)
Qualified hazardous waste facilities
For purposes of subsection (a)(10), the term “qualified hazardous waste facility” means any facility for the disposal of hazardous waste by incineration or entombment but only if—
(i)
High-speed intercity rail facilities
(1)
In general
For purposes of subsection (a)(11), the term “high-speed intercity rail facilities” means any facility (not including rolling stock) for the fixed guideway rail transportation of passengers and their baggage between metropolitan statistical areas (within the meaning of section
143
(k)(2)(B)) using vehicles that are reasonably expected to be capable of attaining a maximum speed in excess of 150 miles per hour between scheduled stops, but only if such facility will be made available to members of the general public as passengers.
(2)
Election by nongovernmental owners
A facility shall be treated as described in subsection (a)(11) only if any owner of such facility which is not a governmental unit irrevocably elects not to claim—
with respect to the property to be financed by the net proceeds of the issue.
(3)
Use of proceeds
A bond issued as part of an issue described in subsection (a)(11) shall not be considered an exempt facility bond unless any proceeds not used within a 3-year period of the date of the issuance of such bond are used (not later than 6 months after the close of such period) to redeem bonds which are part of such issue.
(j)
Environmental enhancements of hydroelectric generating facilities
(1)
In general
For purposes of subsection (a)(12), the term “environmental enhancements of hydroelectric generating facilities” means property—
(A)
the use of which is related to a federally licensed hydroelectric generating facility owned and operated by a governmental unit, and
(k)
Qualified public educational facilities
(1)
In general
For purposes of subsection (a)(13), the term “qualified public educational facility” means any school facility which is—
(2)
Public-private partnership agreement described
A public-private partnership agreement is described in this paragraph if it is an agreement—
(3)
School facility
For purposes of this subsection, the term “school facility” means—
(5)
Annual aggregate face amount of tax-exempt financing
(A)
In general
An issue shall not be treated as an issue described in subsection (a)(13) if the aggregate face amount of bonds issued by the State pursuant thereto (when added to the aggregate face amount of bonds previously so issued during the calendar year) exceeds an amount equal to the greater of—
(B)
Allocation rules
(i)
In general
Except as otherwise provided in this subparagraph, the State may allocate the amount described in subparagraph (A) for any calendar year in such manner as the State determines appropriate.
(ii)
Rules for carryforward of unused limitation
A State may elect to carry forward an unused limitation for any calendar year for 3 calendar years following the calendar year in which the unused limitation arose under rules similar to the rules of section
146
(f), except that the only purpose for which the carryforward may be elected is the issuance of exempt facility bonds described in subsection (a)(13).
(l)
Qualified green building and sustainable design projects
(1)
In general
For purposes of subsection (a)(14), the term “qualified green building and sustainable design project” means any project which is designated by the Secretary, after consultation with the Administrator of the Environmental Protection Agency, as a qualified green building and sustainable design project and which meets the requirements of clauses (i), (ii), (iii), and (iv) of paragraph (4)(A).
(2)
Designations
(A)
In general
Within 60 days after the end of the application period described in paragraph (3)(A), the Secretary, after consultation with the Administrator of the Environmental Protection Agency, shall designate qualified green building and sustainable design projects. At least one of the projects designated shall be located in, or within a 10-mile radius of, an empowerment zone as designated pursuant to section
1391, and at least one of the projects designated shall be located in a rural State. No more than one project shall be designated in a State. A project shall not be designated if such project includes a stadium or arena for professional sports exhibitions or games.
(B)
Minimum conservation and technology innovation objectives
The Secretary, after consultation with the Administrator of the Environmental Protection Agency, shall ensure that, in the aggregate, the projects designated shall—
(i)
reduce electric consumption by more than 150 megawatts annually as compared to conventional generation,
(3)
Limited designations
A project may not be designated under this subsection unless—
(4)
Application
(A)
In general
A project may not be designated under this subsection unless the application for such designation includes a project proposal which describes the energy efficiency, renewable energy, and sustainable design features of the project and demonstrates that the project satisfies the following eligibility criteria:
(i)
Green building and sustainable design
At least 75 percent of the square footage of commercial buildings which are part of the project is registered for United States Green Building Council’s LEED certification and is reasonably expected (at the time of the designation) to receive such certification. For purposes of determining LEED certification as required under this clause, points shall be credited by using the following:
(I)
For wood products, certification under the Sustainable Forestry Initiative Program and the American Tree Farm System.
(ii)
Brownfield redevelopment
The project includes a brownfield site as defined by section 101(39) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C. 9601), including a site described in subparagraph (D)(ii)(II)(aa) thereof.
(iii)
State and local support
The project receives specific State or local government resources which will support the project in an amount equal to at least $5,000,000. For purposes of the preceding sentence, the term “resources” includes tax abatement benefits and contributions in kind.
(v)
Use of tax benefit
The project proposal includes a description of the net benefit of the tax-exempt financing provided under this subsection which will be allocated for financing of one or more of the following:
(vi)
Prohibited facilities
An issue shall not be treated as an issue described in subsection (a)(14) if any proceeds of such issue are used to provide any facility the principal business of which is the sale of food or alcoholic beverages for consumption on the premises.
(vii)
Employment
The project is projected to provide permanent employment of at least 1,500 full time equivalents (150 full time equivalents in rural States) when completed and construction employment of at least 1,000 full time equivalents (100 full time equivalents in rural States).
The application shall include an independent analysis which describes the project’s economic impact, including the amount of projected employment.
(5)
Certification of use of tax benefit
No later than 30 days after the completion of the project, each project must certify to the Secretary that the net benefit of the tax-exempt financing was used for the purposes described in paragraph (4).
(6)
Definitions
For purposes of this subsection—
(7)
Aggregate face amount of tax-exempt financing
(A)
In general
An issue shall not be treated as an issue described in subsection (a)(14) if the aggregate face amount of bonds issued by the State or local government pursuant thereto for a project (when added to the aggregate face amount of bonds previously so issued for such project) exceeds an amount designated by the Secretary as part of the designation.
(8)
Termination
Subsection (a)(14) shall not apply with respect to any bond issued after September 30, 2012.
(9)
Treatment of current refunding bonds
Paragraphs (7)(B) and (8) shall not apply to any bond (or series of bonds) issued to refund a bond issued under subsection (a)(14) before October 1, 2012, if—
(A)
the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be refunded by such issue,
(B)
the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and
(m)
Qualified highway or surface freight transfer facilities