Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/fed/irc21.asc

Text File | 1993-08-24 | 49KB | 1,176 lines

Section 144.  Qualified small issue bond; qualified student loan
bond; qualified redevelopment bond

(a) Qualified small issue bond.

    (1) In general.  For purposes of this part, the term
"qualified small issue bond" means any bond issued as part of an
issue the aggregate authorized face amount of which is $1,000,000
or less and 95 percent or more of the net proceeds of which are
to be used-

    (A) for the acquisition, construction, reconstruction, or
improvement of land or property of a character subject to the
allowance for depreciation, or

    (B) to redeem part or all of a prior issue which was issued
for purposes described in subparagraph (A), or this subparagraph.

    (2) Certain prior issues taken into account.  If-

    (A) the proceeds of 2 or more issues of bonds (whether or
not the issuer of each such issue is the same) are or will be
used primarily with respect to facilities located in the same
incorporated municipality or located in the same county (but not
in any incorporated municipality).

    (B) the principal user of such facilities is or will be the
same person or 2 or more related persons, and

    (C) but for this paragraph, paragraph (1) (or the
corresponding provision of prior law) would apply to each such
issue,

then, for purposes of paragraph (1), in determining the aggregate
face amount of any later issue there shall be taken into account
the aggregate face amount of tax-exempt bonds issued under all
prior such issues and outstanding at the time of such later issue
(not including as outstanding any bond which is to be redeemed
(other than in an advance refunding) from the net proceeds of the
later issue).

    (3) Related persons.  For purposes of this subsection, a
person is a related person to another person if-

    (A) the relationship between such persons would result in a
disallowance of losses under section 267 or 707(b), or

    (B) such persons are members of the same controlled group of
corporations (as defined in section 1563(a), except that "more
than 50 percent" shall be substituted for "at least 80 percent"
each place it appears therein).

    (4) $10,000,000 limit in certain cases.

    (A) In general.  At the election of the issuer with respect

to any issue, this subsection shall be applied-

    (i) by substituting "$10,000,000" for "$1,000,000 in
paragraph (1), and

    (ii) in determining the aggregate face amount of such issue,
by taking into account not only the amount described in paragraph
(2), but also the aggregate amount of capital expenditures with
respect to facilities described in subparagraph (B) paid or
incurred during the 6-year period beginning 3 years before the
date of such issue and ending 3 years after such date (and
financed otherwise than to of the proceeds of outstanding tax-
exempt issues to which paragraph (1) (or the corresponding
provision of prior law) applied), as if the aggregate amount of
such  capital expenditures constituted the face amount of a prior
outstanding issue described in paragraph (2).

    (B) Facilities taken into account.  For purposes of
subparagraph (A)(ii), the facilities described in this
subparagraph are facilities-

    (i) located in the same incorporated municipality or located
in the same county (but not in any incorporated municipality),
and

    (ii) the principal user of which is or will be the same
person or 2 or more related persons.

For purposes of clause (i), the determination of whether or not
facilities are located in the same governmental unit shall be
made as of the date of issue of the issue in question.

    (C) Certain capital expenditures not taken into account.
For purposes of subparagraph (A)(II), any capital expenditure-

    (i) to replace property destroyed or damaged by fire, storm,
or other casualty, to the extent of the fair market value of the
property replaced,

    (ii) required by a change made after the date of issue of
the issue in question in a Federal or State law or local
ordinance of general application or required by a change made
after such date in rules and regulations of general application
issued under such a law or ordinance.

    (iii) required by circumstances which could not be
reasonably foreseen on such date of issue or arising out of a
mistake of law or fact (but the aggregate amount of expenditures
not taken into account under this clause with respect to any
issue shall not exceed $1,000,000), or

    (iv) described in clause (i) or (ii) of section 41(b)(2)(A)
for which a deduction was allowed under section 174(a),

shall not be taken into account.

    (D) Limitation of loss of tax exemption.  In applying
subparagraph (A)(ii) with respect to capital expenditures made
after the date of any issue, not bond issued as a part of such
issue shall cease to be treated as a qualified small issue bond
by reason of any such expenditure for any period before the date
on which such expenditure is paid or incurred.

    (E) Certain refinancing issues.  In the case of any issue
described in paragraph (1)(B), an election may be made under
subparagraph (A) of this paragraph only if all of the prior
issues being redeemed are issues to which paragraph (1) (or the
corresponding provision of prior law) applied.  In applying
subparagraph (A)(ii) with respect to such a refinancing issue,
capital expenditures shall be taken into account only for
purposes of determining whether the prior issues being redeemed
qualified (and would have continued to qualify) under paragraph
(1) (or the corresponding provision of prior law).

    (F) Aggregate amount of capital expenditures where there is
urban development action grant.  If the case of any issue 95
percent or more of the net proceeds of which are to be used to
provide facilities with respect to which an urban development
action grant has been made under section 119 of the Housing and
Community Development Act of 1974, capital expenditures of not to
exceed $10,000,000 shall not be taken into account for purposes
of applying subparagraph (A)(ii).

    (5) Issues for residential purposes.  This subsection shall
not apply to any bond issued as part of an issue 5 percent or
more of the net proceeds of which are to be used directly or
indirectly to provide residential real property for family units.

    (6) Limitations on treatment of bonds as part of the same
issue.

    (A) In general.  For purposes of this subsection, separate
lots of bonds which (but for this subparagraph) would be treated
as part of the same issue shall be treated as separate issues
unless the proceeds of such lots are to be used with respect to 2
or more facilities-

    (i) which are located in more than 1 State, or

    (ii) which have, or will have, as the same principal user
the same person or related persons.

    (B) Franchises.  For purposes of subparagraph (A), a person
(other than a governmental unit) shall be considered a principal
user of a facility if such person (or a group of related persons
which includes such person)-

    (i) guarantees, arranges, participates in, or assists with
the issuance (or pays any portion of the cost of issuance) of any
bond the proceeds of which are to be used to finance or refinance
such facility, and

    (ii) provides any property, or any franchise, trademark, or
trade name (within the meaning of section 1253), which is to be
used in connection with such facility.

    (7) Subsection not to apply if bonds issued with certain
other tax-exempt bonds. This subsection shall not apply to any
bond issued as part of an issue (other than an issue to which
paragraph (4) applies) if the interest on any other bond which is
part of such issue is excluded from gross income under any
provision of law other than this subsection.

    (8) Restrictions on financing certain facilities.  This
subsection shall not apply to an issue if-

    (A) more than 25 percent of the net proceeds of the issue
are to be used to provide a facility the primary purpose of which
is