§142 — Exempt facility bond
19 citing cases
Statute Text — 26 U.S.C. §142
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—
airports and spaceports,
docks and wharves,
mass commuting facilities,
facilities for the furnishing of water,
sewage facilities,
solid waste disposal facilities,
qualified residential rental projects,
facilities for the local furnishing of electric energy or gas,
local district heating or cooling facilities,
qualified hazardous waste facilities,
high-speed intercity rail facilities,
environmental enhancements of hydroelectric generating facilities,
qualified public educational facilities,
qualified green building and sustainable design projects,
qualified highway or surface freight transfer facilities,
qualified broadband projects, or
qualified carbon dioxide capture facilities.
For purposes of subsection (a)—
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.
For purposes of subparagraph (A), property leased by a governmental unit shall be treated as owned by such governmental unit if—
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,
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
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.
For purposes of subparagraph (A), spaceport property located on land leased by a governmental unit from the United States shall not fail to be treated as owned by a governmental unit if the requirements of this paragraph are met by the lease and any subleases of the property.
An office shall not be treated as described in a paragraph of subsection (a) unless—
the office is located on the premises of a facility described in such a paragraph, and
not more than a de minimis amount of the functions to be performed at such office is not directly related to the day-to-day operations at such facility.
For purposes of subsection (a)—
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.
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)).
Any lodging facility.
Any retail facility (including food and beverage facilities) in excess of a size necessary to serve passengers and employees at the exempt facility.
Any retail facility (other than parking) for passengers or the general public located outside the exempt facility terminal.
Any office building for individuals who are not employees of a governmental unit or of the operating authority for the exempt facility.
Any industrial park or manufacturing facility.
For purposes of this section—
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:
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.
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.
For purposes of this subsection—
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—
the date which is 15 years after the date on which 50 percent of the residential units in the project are occupied,
the 1st day on which no tax-exempt private activity bond issued with respect to the project is outstanding, or
the date on which any assistance provided with respect to the project under section 8 of the United States Housing Act of 1937 terminates.
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.
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.
For purposes of clause (ii), the term “qualified building” means any building located—
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
in any county adjacent to a county described in subclause (I).
For purposes of clause (iii), the term “qualified military installation” means any military installation or facility the number of members of the Armed Forces of the United States assigned to which, as of June 1, 2008, is not less than 1,000.
Rules similar to the rules of section 42(i)(3)(D) shall apply for purposes of this subsection.
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).
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.
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—
the area median gross income determined under the HUD hold harmless policy with respect to such project for calendar year 2008, plus
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.
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.
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.
For purposes of this subsection—
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.
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.
In the case of a project with respect to which credit is allowed under section 42, the second sentence of subparagraph (B) shall be applied by substituting “building (within the meaning of section 42)” for “project”.
In the case of any project described in subparagraph (B), the 2d sentence of subparagraph (B) of paragraph (3) shall be applied by substituting—
“170 percent” for “140 percent”, and
“any low-income unit in the same project is occupied by a new resident whose income exceeds 40 percent of area median gross income” for “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”.
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):
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.
The project meets the requirements of this clause if the gross rent with respect to each low-income unit in the project does not exceed 30 percent of the applicable income limit which applies to individuals occupying the unit.
The project meets the requirements of this clause if the gross rent with respect to each low-income unit in the project does not exceed ½ of the average gross rent with respect to units of comparable size which are not occupied by individuals who meet the applicable income limit.
For purposes of subparagraph (B)—
The term “low-income unit” means any unit which is required to be occupied by individuals who meet the applicable income limit.
The term “gross rent” includes—
any payment under section 8 of the United States Housing Act of 1937, and
any utility allowance determined by the Secretary after taking into account such determinations under such section 8.
For purposes of paragraphs (3) and (4), the term “applicable income limit” means—
the limitation under subparagraph (A) or (B) of paragraph (1) which applies to the project, or
in the case of a unit to which paragraph (4)(B)(i) applies, the limitation which applies to such unit.
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”.
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).
For purposes of subsection (a)(4), the term “facilities for the furnishing of water” means any facility for the furnishing of water if—
the water is or will be made available to members of the general public (including electric utility, industrial, agricultural, or commercial users), and
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.
For purposes of subsection (a)(8)—
The local furnishing of electric energy or gas from a facility shall only include furnishing solely within the area consisting of—
a city and 1 contiguous county, or
2 contiguous counties.
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).
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)—
an escrow to pay principal of, premium (if any), and interest on the bonds is established within a reasonable period after the date such order becomes final, and
bonds are redeemed not later than the earliest date on which such bonds may be redeemed.
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—
the facility will—
be used by a person who is engaged in the local furnishing of that energy source on
January 1, 1997
, and
be used to provide service within the area served by such person on
January 1, 1997
(or within a county or city any portion of which is within such area), or
the facility will be used by a successor in interest to such person for the same use and within the same service area as described in subparagraph (A).
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).
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—
such election is made with respect to all facilities for the local furnishing of electric energy or gas, or both, by such person,
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,
any expansion of the service area—
is not financed with the proceeds of any exempt facility bond described in subsection (a)(8), and
is not treated as a nonqualifying use under the rules of paragraph (2), and
all outstanding bonds used to finance the facilities for such person are redeemed not later than 6 months after the later of—
the earliest date on which such bonds may be redeemed, or
the date of the election.
For purposes of this paragraph, the term “person” includes a group of related persons (within the meaning of section 144(a)(3)) which includes such person.
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.
For purposes of paragraph (1), the term “local district heating or cooling system” means any local system consisting of a pipeline or network (which may be connected to a heating or cooling source) providing hot water, chilled water, or steam to 2 or more users for—
residential, commercial, or industrial heating or cooling, or
process steam.
For purposes of this paragraph, a local system includes facilities furnishing heating and cooling to an area consisting of a city and 1 contiguous county.
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—
the facility is subject to final permit requirements under subtitle C of title II of the Solid Waste Disposal Act (as in effect on the date of the enactment of the Tax Reform Act of 1986), and
the portion of such facility which is to be provided by the issue does not exceed the portion of the facility which is to be used by persons other than—
the owner or operator of such facility, and
any related person (within the meaning of section 144(a)(3)) to such owner or operator.
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.
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—
any deduction under section 167 or 168, and
any credit under this subtitle,
with respect to the property to be financed by the net proceeds of the issue.
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.
For purposes of subsection (a)(12), the term “environmental enhancements of hydroelectric generating facilities” means property—
the use of which is related to a federally licensed hydroelectric generating facility owned and operated by a governmental unit, and
which—
protects or promotes fisheries or other wildlife resources, including any fish by-pass facility, fish hatchery, or fisheries enhancement facility, or
is a recreational facility or other improvement required by the terms and conditions of any Federal licensing permit for the operation of such generating facility.
A bond issued as part of an issue described in subsection (a)(12) shall not be considered an exempt facility bond unless at least 80 percent of the net proceeds of the issue of which it is a part are used to finance property described in paragraph (1)(B)(i).
For purposes of subsection (a)(13), the term “qualified public educational facility” means any school facility which is—
part of a public elementary school or a public secondary school, and
owned by a private, for-profit corporation pursuant to a public-private partnership agreement with a State or local educational agency described in paragraph (2).
A public-private partnership agreement is described in this paragraph if it is an agreement—
under which the corporation agrees—
to do 1 or more of the following: construct, rehabilitate, refurbish, or equip a school facility, and
at the end of the term of the agreement, to transfer the school facility to such agency for no additional consideration, and
the term of which does not exceed the term of the issue to be used to provide the school facility.
For purposes of this subsection, the term “school facility” means—
any school building,
any functionally related and subordinate facility and land with respect to such building, including any stadium or other facility primarily used for school events, and
any property, to which section 168 applies (or would apply but for section 179), for use in a facility described in subparagraph (A) or (B).
For purposes of this subsection, the terms “elementary school” and “secondary school” have the meanings given such terms by section 14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 8801), as in effect on the date of the enactment of this subsection.
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—
$10 multiplied by the State population, or
$5,000,000.
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.
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).
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).
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.
The Secretary, after consultation with the Administrator of the Environmental Protection Agency, shall ensure that, in the aggregate, the projects designated shall—
reduce electric consumption by more than 150 megawatts annually as compared to conventional generation,
reduce daily sulfur dioxide emissions by at least 10 tons compared to coal generation power,
expand by 75 percent the domestic solar photovoltaic market in the United States (measured in megawatts) as compared to the expansion of that market from 2001 to 2002, and
use at least 25 megawatts of fuel cell energy generation.
A project may not be designated under this subsection unless—
the project is nominated by a State or local government within 180 days of the enactment of this subsection, and
such State or local government provides written assurances that the project will satisfy the eligibility criteria described in paragraph (4).
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:
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:
For wood products, certification under the Sustainable Forestry Initiative Program and the American Tree Farm System.
For renewable wood products, as credited for recycled content otherwise provided under LEED certification.
For composite wood products, certification under standards established by the American National Standards Institute, or such other voluntary standards as published in the Federal Register by the Administrator of the Environmental Protection Agency.
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.
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.
The project includes at least one of the following:
At least 1,000,000 square feet of building.
At least 20 acres.
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:
The purchase, construction, integration, or other use of energy efficiency, renewable energy, and sustainable design features of the project.
Compliance with certification standards cited under clause (i).
The purchase, remediation, and foundation construction and preparation of the brownfields site.
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.
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.
Each application described in subparagraph (A) shall contain for each project a description of—
the amount of electric consumption reduced as compared to conventional construction,
the amount of sulfur dioxide daily emissions reduced compared to coal generation,
the amount of the gross installed capacity of the project’s solar photovoltaic capacity measured in megawatts, and
the amount, in megawatts, of the project’s fuel cell energy generation.
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).
For purposes of this subsection—
The term “rural State” means any State which has—
a population of less than 4,500,000 according to the 2000 census,
a population density of less than 150 people per square mile according to the 2000 census, and
increased in population by less than half the rate of the national increase between the 1990 and 2000 censuses.
The term “local government” has the meaning given such term by section 1393(a)(5).
The term “net benefit of tax-exempt financing” means the present value of the interest savings (determined by a calculation established by the Secretary) which result from the tax-exempt status of the bonds.
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.
The Secretary may not allocate authority to issue qualified green building and sustainable design project bonds in an aggregate face amount exceeding $2,000,000,000.
Subsection (a)(14) shall not apply with respect to any bond issued after September 30, 2012.
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—
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,
the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and
the net proceeds of the refunding bond are used to redeem the refunded bond not later than 90 days after the date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be determined in accordance with section 147(b)(2)(A).
For purposes of subsection (a)(15), the term “qualified highway or surface freight transfer facilities” means—
any surface transportation project which receives Federal assistance under title 23, United States Code (as in effect on the date of the enactment of this subsection),
any project for an international bridge or tunnel for which an international entity authorized under Federal or State law is responsible and which receives Federal assistance under title 23, United States Code (as so in effect), or
any facility for the transfer of freight from truck to rail or rail to truck (including any temporary storage facilities directly related to such transfers) which receives Federal assistance under either title 23 or title 49, United States Code (as so in effect).
The aggregate amount allocated by the Secretary of Transportation under subparagraph (C) shall not exceed $30,000,000,000.
An issue shall not be treated as an issue described in subsection (a)(15) if the aggregate face amount of bonds issued pursuant to such issue for any qualified highway or surface freight transfer facility (when added to the aggregate face amount of bonds previously so issued for such facility) exceeds the amount allocated to such facility under subparagraph (C).
The Secretary of Transportation shall allocate the amount described in subparagraph (A) among qualified highway or surface freight transfer facilities in such manner as the Secretary determines appropriate.
An issue shall not be treated as an issue described in subsection (a)(15) unless at least 95 percent of the net proceeds of the issue is expended for qualified highway or surface freight transfer facilities within the 5-year period beginning on the date of issuance. If at least 95 percent of such net proceeds is not expended within such 5-year period, an issue shall be treated as continuing to meet the requirements of this paragraph if the issuer uses all unspent proceeds of the issue to redeem bonds of the issue within 90 days after the end of such 5-year period. The Secretary, at the request of the issuer, may extend such 5-year period if the issuer establishes that any failure to meet such period is due to circumstances beyond the control of the issuer.
Paragraph (2) shall not apply to any bond (or series of bonds) issued to refund a bond issued under subsection (a)(15) if—
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,
the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, and
the refunded bond is redeemed not later than 90 days after the date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be determined in accordance with section 147(b)(2)(A).
For purposes of subsection (a)(16), the term “qualified broadband project” means any project which—
is designed to provide broadband service solely to 1 or more census block groups in which more than 50 percent of residential households do not have access to fixed, terrestrial broadband service which delivers at least 25 megabits per second downstream and at least 3 megabits service upstream, and
results in internet access to residential locations, commercial locations, or a combination of residential and commercial locations at speeds not less than 100 megabits per second for downloads and 20 megabits for second for uploads, but only if at least 90 percent of the locations provided such access under the project are locations where, before the project, a broadband service provider—
did not provide service, or
did not provide service meeting the minimum speed requirements described in subparagraph (A).
A project shall not be treated as a qualified broadband project unless, before the issue date of any issue the proceeds of which are to be used to fund the project, the issuer—
notifies each broadband service provider providing broadband service in the area within which broadband services are to be provided under the project of the project and its intended scope,
includes in such notice a request for information from each such provider with respect to the provider’s ability to deploy, manage, and maintain a broadband network capable of providing gigabit capable Internet access to residential or commercial locations, and
allows each such provider at least 90 days to respond to such notice and request.
For purposes of subsection (a)(17), the term “qualified carbon dioxide capture facility” means—
the eligible components of an industrial carbon dioxide facility, and
a direct air capture facility (as defined in section 45Q(e)(3)).
For purposes of this subsection:
The term “eligible component” means any equipment which is installed in an industrial carbon dioxide facility that satisfies the requirements under paragraph (3) and which is—
used for the purpose of capture, treatment and purification, compression, transportation, or on-site storage of carbon dioxide produced by the industrial carbon dioxide facility, or
integral or functionally related and subordinate to a process which converts a solid or liquid product from coal, petroleum residue, biomass, or other materials which are recovered for their energy or feedstock value into a synthesis gas composed primarily of carbon dioxide and hydrogen for direct use or subsequent chemical or physical conversion.
For purposes of this subparagraph—
The term “biomass” means any—
agricultural or plant waste,
byproduct of wood or paper mill operations, including lignin in spent pulping liquors, and
other products of forestry maintenance.
The term “biomass” does not include paper which is commonly recycled.
The term “coal” means anthracite, bituminous coal, subbituminous coal, lignite, and peat.
Except as provided in clause (ii), the term “industrial carbon dioxide facility” means a facility that emits carbon dioxide (including from any fugitive emissions source) that is created as a result of any of the following processes:
Fuel combustion.
Gasification.
Bioindustrial.
Fermentation.
Any manufacturing industry relating to—
chemicals,
fertilizers,
glass,
steel,
petroleum residues,
forest products,
agriculture, including feedlots and dairy operations, and
transportation grade liquid fuels.
For purposes of clause (i), an industrial carbon dioxide facility shall not include—
any geological gas facility, or
any air separation unit that—
does not qualify as gasification equipment, or
is not a necessary component of an oxy-fuel combustion process.
For purposes of this subparagraph—
The term “petroleum residue” means the carbonized product of high-boiling hydrocarbon fractions obtained in petroleum processing.
The term “geological gas facility” means a facility that—
produces a raw product consisting of gas or mixed gas and liquid from a geological formation,
transports or removes impurities from such product, or
separates such product into its constituent parts.
Subject to subparagraph (B), the eligible components of an industrial carbon dioxide facility satisfies the requirements of this paragraph if such eligible components are designed to have a capture and storage percentage (as determined under subparagraph (C)) that is equal to or greater than 65 percent.
In the case of an industrial carbon dioxide facility designed with a capture and storage percentage that is less than 65 percent, the percentage of the cost of the eligible components installed in such facility that may be financed with tax-exempt bonds may not be greater than the designed capture and storage percentage.
Subject to clause (ii), the capture and storage percentage shall be an amount, expressed as a percentage, equal to the quotient of—
the total metric tons of carbon dioxide designed to be annually captured, transported, and injected into—
a facility for geologic storage, or
an enhanced oil or gas recovery well followed by geologic storage, divided by
the total metric tons of carbon dioxide which would otherwise be released into the atmosphere each year as industrial emission of greenhouse gas if the eligible components were not installed in the industrial carbon dioxide facility.
In the case of eligible components that are designed to capture carbon dioxide solely from specific sources of emissions or portions thereof within an industrial carbon dioxide facility, the capture and storage percentage under this subparagraph shall be determined based only on such specific sources of emissions or portions thereof.
The Secretary shall issue such regulations or other guidance as are necessary to carry out the provisions of this subsection, including methods for determining costs attributable to an eligible component for purposes of paragraph (3)(A).
For purposes of subsection (a)(1), the term “spaceport” means any facility located at or in close proximity to a launch site or reentry site used for—
manufacturing, assembling, or repairing spacecraft, space cargo, other facilities described in this paragraph, or any component of the foregoing,
flight control operations,
providing launch services and reentry services, or
transferring crew, spaceflight participants, or space cargo to or from spacecraft.
For purposes of paragraph (1)—
The term “space cargo” includes satellites, scientific experiments, other property transported into space, and any other type of payload, whether or not such property returns from space.
The term “spacecraft” means a launch vehicle or a reentry vehicle.
The terms “launch site”, “crew”, “space flight participant”, “launch services”, “launch vehicle”, “payload”, “reentry services”, “reentry site”, a “reentry vehicle” shall have the respective meanings given to such terms by section 50902 of title 51, United States Code (as in effect on the date of enactment of this subsection).
A facility shall not be required to be available for use by the general public to be treated as a spaceport for purposes of this section.
With respect to spaceports, subsection (c)(2)(E) shall not apply to spaceport property described in paragraph (1)(A).
Treasury Regulations
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Treas. Reg. §1.142(a)(5)-1Exempt facility bonds: Sewage facilities
(a) In general. Under section 103(a), a private activity bond is a tax-exempt bond only if it is a qualified bond. A qualified bond includes an exempt facility bond, defined as any bond issued as part of an issue 95 percent or more of the net proceeds of which are used to provide a facility specified in section 142. One type of facility specified in section 142(a) is a sewage facility. This section defines the term sewage facility for purposes of section 142(a).
(b) Definitions—(1) Sewage facility defined. A sewage facility is property—
(i) Except as provided in paragraphs (b)(2) and (d) of this section, used for the secondary treatment of wastewater; however, for property treating wastewater reasonably expected to have an average daily raw wasteload concentration of biochemical oxygen demand (BOD) that exceeds 350 milligrams per liter as oxygen (measured at the time the influent enters the facility) (the BOD limit), this paragraph (b)(1)(i) applies only to the extent the treatment is for wastewater having an average daily raw wasteload concentration of BOD that does not exceed the BOD limit;
(ii) Used for the preliminary and/or primary treatment of wastewater but only to the extent used in connection with secondary treatment (without regard to the BOD limit described in paragraph (b)(1)(i) of this section);
(iii) Used for the advanced or tertiary treatment of wastewater but only to the extent used in connection with and after secondary treatment;
(iv) Used for the collection, storage, use, processing, or final disposal of—
(A) Wastewater, which property is necessary for such preliminary, primary, secondary, advanced, or tertiary treatment; or
(B) Sewage sludge removed during such preliminary, primary, secondary, advanced, or tertiary treatment (without regard to the BOD limit described in paragraph (b)(1)(i) of this section);
(v) Used for the treatment, collection, storage, use, processing, or final disposal of septage (without regard to the BOD limit described in paragraph (b)(1)(i) of this section); and
(vi) Functionally related and subordinate to property described in this paragraph (b)(1), such as sewage disinfection property.
(2) Special rules and exceptions—(i) Exception to BOD limit. A facility treating wastewater with an average daily raw wasteload concentration of BOD exceeding the BOD limit will not fail to qualify as a sewage facility described in paragraph (b)(1) of this section to the extent that the failure to satisfy the BOD limit results from the implementation of a federal, state, or local water conservation program (for example, a program designed to promote water use efficiency that results in BOD concentrations beyond the BOD limit).
(ii) Anti-abuse rule for BOD limit. A facility does not satisfy the BOD limit if there is any intentional manipulation of the BOD level to circumvent the BOD limit (for example, increasing the volume of water in the wastewater before the influent enters the facility with the intention of reducing the BOD level).
(iii) Authority of Commissioner. In appropriate cases upon application to the Commissioner, the Commissioner may determine that facilities employing technologically advanced or innovative treatment processes qualify as sewage facilities if it is demonstrated that these facilities perform functions that are consistent with the definition of sewage facilities described in paragraph (b)(1) of this section.
(3) Other applicable definitions—(i) Advanced or tertiary treatment means the treatment of wastewater after secondary treatment. Advanced or tertiary treatment ranges from biological treatment extensions to physical-chemical separation techniques such as denitrification, ammonia stripping, carbon adsorption, and chemical precipitation.
(ii) Nonconventional pollutants are any pollutants that are not listed in 40 CFR 401.15, 401.16, or appendix A to part 423.
(iii) Preliminary treatment means treatment that removes large extraneous matter from incoming wastewater and renders the incoming wastewater more amenable to subsequent treatment and handling.
(iv) Pretreatment means a process that preconditions wastewater to neutralize or remove toxic, priority, or nonconventional pollutants that could adversely affect sewers or inhibit a preliminary, primary, secondary, advanced, or tertiary treatment operation.
(v) Primary treatment means treatment that removes material that floats or will settle, usually by screens or settling tanks.
(vi) Priority pollutants are those pollutants listed in appendix A to 40 CFR part 423.
(vii) Secondary treatment means the stage in sewage treatment in which a bacterial process (or an equivalent process) consumes the organic parts of wastes, usually by trickling filters or an activated sludge process.
(viii) Sewage sludge is defined in 40 CFR 122.2 and includes septage.
(ix) Toxic pollutants are those pollutants listed in 40 CFR 401.15.
(c) Other property not included in the definition of a sewage facility. Property other than property described in paragraph (b)(1) of this section is not a sewage facility. Thus, for example, property is not a sewage facility, or functionally related and subordinate property, if the property is used for pretreatment of wastewater (whether or not this treatment is necessary to perform preliminary, primary, secondary, advanced, or tertiary treatment), or the related collection, storage, use, processing, or final disposal of the wastewater. In addition, property used to treat, process, or use wastewater subsequent to the time the wastewater can be discharged into navigable waters, as defined in 33 U.S.C. 1362, is not a sewage facility.
(d) Allocation of costs. In the case of property that has both a use described in paragraph (b)(1) of this section (a sewage treatment function) and a use other than sewage treatment, only the portion of the cost of the property allocable to the sewage treatment function is taken into account as an expenditure to provide sewage facilities. The portion of the cost of property allocable to the sewage treatment function is determined by allocating the cost of that property between the property's sewage treatment function and any other uses by any method which, based on all the facts and circumstances, reasonably reflects a separation of costs for each use of the property.
(e) Effective date—(1) In general. This section applies to issues of bonds issued after February 21, 1995.
(2) Refundings. In the case of a refunding bond issued to refund a bond to which this section does not apply, the issuer need not apply this section to that refunding bond. This paragraph (e)(2) applies only if the weighted average maturity of the refunding bonds, as described in section 147(b), is not greater than the remaining weighted average maturity of the refunded bonds.
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Treas. Reg. §1.142(a)(5)-1(a)In general.
In general. Under section 103(a), a private activity bond is a tax-exempt bond only if it is a qualified bond. A qualified bond includes an exempt facility bond, defined as any bond issued as part of an issue 95 percent or more of the net proceeds of which are used to provide a facility specified in section 142. One type of facility specified in section 142(a) is a sewage facility. This section defines the term sewage facility for purposes of section 142(a).
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Treas. Reg. §1.142(a)(5)-1(b)Definitions—(1) Sewage facility defined.
Definitions—(1) Sewage facility defined. A sewage facility is property—
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Treas. Reg. §1.142(a)(5)-1(c)Other property not included in the definition of a sewage facility.
Other property not included in the definition of a sewage facility. Property other than property described in paragraph (b)(1) of this section is not a sewage facility. Thus, for example, property is not a sewage facility, or functionally related and subordinate property, if the property is used for pretreatment of wastewater (whether or not this treatment is necessary to perform preliminary, primary, secondary, advanced, or tertiary treatment), or the related collection, storage, use, processing, or final disposal of the wastewater. In addition, property used to treat, process, or use wastewater subsequent to the time the wastewater can be discharged into navigable waters, as defined in 33 U.S.C. 1362, is not a sewage facility.
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Treas. Reg. §1.142(a)(5)-1(d)Allocation of costs.
Allocation of costs. In the case of property that has both a use described in paragraph (b)(1) of this section (a sewage treatment function) and a use other than sewage treatment, only the portion of the cost of the property allocable to the sewage treatment function is taken into account as an expenditure to provide sewage facilities. The portion of the cost of property allocable to the sewage treatment function is determined by allocating the cost of that property between the property's sewage treatment function and any other uses by any method which, based on all the facts and circumstances, reasonably reflects a separation of costs for each use of the property.
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Treas. Reg. §1.142(a)(5)-1(e)Effective date—(1) In general.
Effective date—(1) In general. This section applies to issues of bonds issued after February 21, 1995.
(2) Refundings. In the case of a refunding bond issued to refund a bond to which this section does not apply, the issuer need not apply this section to that refunding bond. This paragraph (e)(2) applies only if the weighted average maturity of the refunding bonds, as described in section 147(b), is not greater than the remaining weighted average maturity of the refunded bonds.
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Treas. Reg. §1.142(a)(5)-1(i)§1.142(a)(5)-1(i)
Except as provided in paragraphs (b)(2) and (d) of this section, used for the secondary treatment of wastewater; however, for property treating wastewater reasonably expected to have an average daily raw wasteload concentration of biochemical oxygen demand (BOD) that exceeds 350 milligrams per liter as oxygen (measured at the time the influent enters the facility) (the BOD limit), this paragraph (b)(1)(i) applies only to the extent the treatment is for wastewater having an average daily raw wasteload concentration of BOD that does not exceed the BOD limit;
(ii) Used for the preliminary and/or primary treatment of wastewater but only to the extent used in connection with secondary treatment (without regard to the BOD limit described in paragraph (b)(1)(i) of this section);
(iii) Used for the advanced or tertiary treatment of wastewater but only to the extent used in connection with and after secondary treatment;
(iv) Used for the collection, storage, use, processing, or final disposal of—
(A) Wastewater, which property is necessary for such preliminary, primary, secondary, advanced, or tertiary treatment; or
(B) Sewage sludge removed during such preliminary, primary, secondary, advanced, or tertiary treatment (without regard to the BOD limit described in paragraph (b)(1)(i) of this section);
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Treas. Reg. §1.142(a)(5)-1(v)Primary treatment means treatment that removes material that floats or will settle, usually by screens or settling tanks.
Primary treatment means treatment that removes material that floats or will settle, usually by screens or settling tanks.
(vi) Priority pollutants are those pollutants listed in appendix A to 40 CFR part 423.
(vii) Secondary treatment means the stage in sewage treatment in which a bacterial process (or an equivalent process) consumes the organic parts of wastes, usually by trickling filters or an activated sludge process.
(viii) Sewage sludge is defined in 40 CFR 122.2 and includes septage.
(ix) Toxic pollutants are those pollutants listed in 40 CFR 401.15.
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Treas. Reg. §1.142(a)(6)-1Exempt facility bonds: solid waste disposal facilities
(a) In general. This section defines the term solid waste disposal facility for purposes of section 142(a)(6).
(b) Solid waste disposal facility. The term solid waste disposal facility means a facility to the extent that the facility—
(1) Processes solid waste (as defined in paragraph (c) of this section) in a qualified solid waste disposal process (as defined in paragraph (d) of this section);
(2) Performs a preliminary function (as defined in paragraph (f) of this section); or
(3) Is functionally related and subordinate (within the meaning of § 1.103-8(a)(3)) to a facility described in paragraph (b)(1) or (b)(2) of this section.
(c) Solid waste—(1) In general. Except to the extent excluded under paragraph (c)(2) of this section, for purposes of section 142(a)(6), the term solid waste means garbage, refuse, and other solid material derived from any agricultural, commercial, consumer, governmental, or industrial operation or activity if the material meets the requirements of both paragraph (c)(1)(i) and paragraph (c)(1)(ii) of this section. For purposes of this section, material is solid if it is solid at ambient temperature and pressure.
(i) Used material or residual material. Material meets the requirements of this paragraph (c)(1)(i) if it is either used material (as defined in paragraph (c)(1)(i)(A)) of this section or residual material (as defined in paragraph (c)(1)(i)(B) of this section).
(A) Used material. The term used material means any material that is a product of any agricultural, commercial, consumer, governmental, or industrial operation or activity, or a component of any such product or activity, and that has been used previously. Used material also includes animal waste produced by animals from a biological process.
(B) Residual material. The term residual material means material that meets the requirements of this paragraph (c)(1)(i)(B). The material must be a residual byproduct or excess raw material that results from or remains after the completion of any agricultural, commercial, consumer, governmental, or industrial production process or activity or from the provision of any service. In the case of multiple processes constituting an integrated manufacturing or industrial process, the material must result from or remain after the completion of such integrated process. As of the issue date of the bonds used to finance the solid waste disposal facility, the material must be reasonably expected to have a fair market value that is lower than the value of all of the products made in that production process or lower than the value of the service that produces such residual material.
(ii) Reasonably expected introduction into a qualified solid waste disposal process. Material meets the requirements of this paragraph (c)(1)(ii) if it is reasonably expected by the person who generates, purchases, or otherwise acquires it to be introduced within a reasonable time after such generation, purchase or acquisition into a qualified solid waste disposal process described in paragraph (d) of this section.
(2) Exclusions from solid waste. The following materials do not constitute solid waste:
(i) Virgin material. Except to the extent that virgin material constitutes an input to a final disposal process or residual material, solid waste excludes any virgin material. The term virgin material means material that has not been processed into an agricultural, commercial, consumer, governmental, or industrial product, or a component of any such product. Further, for this purpose, material continues to be virgin material after it has been grown, harvested, mined, or otherwise extracted from its naturally occurring location and cleaned, divided into component elements, modified, or enhanced, as long as further processing is required before it becomes an agricultural, commercial, consumer, or industrial product, or a component of any such product.
(ii) Solids within liquids and liquid waste. Solid waste excludes any solid or dissolved material in domestic sewage or other significant pollutant in water resources, such as silt, dissolved or suspended solids in industrial waste water effluents, dissolved materials in irrigation return flows or other common water pollutants, and liquid or gaseous waste.
(iii) Precious metals. Except to the extent that a precious metal constitutes an input to a final disposal process and/or an unrecoverable trace of the particular precious metal, solid waste excludes gold, silver, ruthenium, rhodium, palladium, osmium, iridium, platinum, gallium, rhenium, and any other precious metal material as may be identified by the Internal Revenue Service in future public administrative guidance.
(iv) Hazardous material. Solid waste excludes any hazardous material that must be disposed of at a facility that is subject to final permit requirements under subtitle C of title II of the Solid Waste Disposal Act as in effect on the date of the enactment of the Tax Reform Act of 1986 (which is October 22, 1986). See section 142(h)(1) of the Internal Revenue Code for the definition of qualified hazardous waste facilities.
(v) Radioactive material. Solid waste excludes any radioactive material subject to regulation under the Nuclear Regulatory Act (10 CFR 1.1 et seq.), as in effect on the issue date of the bonds.
(d) Qualified solid waste disposal process. The term qualified solid waste disposal process means the processing of solid waste in a final disposal process (as defined in paragraph (d)(1) of this section), an energy conversion process (as defined in paragraph (d)(2) of this section), or a recycling process (as defined in paragraph (d)(3) of this section). Absent an express restriction to the contrary in this section, a qualified solid waste disposal process may employ any biological, engineering, industrial, or technological method.
(1) Final disposal process. The term final disposal process means the placement of solid waste in a landfill (including, for this purpose, the spreading of solid waste over land in an environmentally compliant and safe manner with no intent to remove such solid waste), the incineration of solid waste without capturing any useful energy, or the containment of solid waste with a reasonable expectation as of the date of issue of the bonds that the containment will continue indefinitely and that the solid waste has no current or future beneficial use.
(2) Energy conversion process. The term energy conversion process means a thermal, chemical, or other process that is applied to solid waste to create and capture synthesis gas, heat, hot water, steam, or other useful energy. The energy conversion process begins at the point of the first application of such process. The energy conversion process ends at the point at which the useful energy is first created, captured, or incorporated into the form of synthesis gas, heat, hot water, or other useful energy and before any transfer or distribution of such synthesis gas, heat, hot water or other useful energy, regardless of whether such synthesis gas, heat, hot water, or other useful energy constitutes a first useful product within the meaning of paragraph (e) of this section.
(3) Recycling process—(i) In general. The term recycling process means reconstituting, transforming, or otherwise processing solid waste into a useful product. The recycling process begins at the point of the first application of a process to reconstitute or transform the solid waste into a useful product, such as decontamination, melting, re-pulping, shredding, or other processing of the solid waste to accomplish this purpose. The recycling process ends at the point of completion of production of the first useful product from the solid waste.
(ii) Refurbishment, repair, or similar activities. The term recycling process does not include refurbishment, repair, or similar activities. The term refurbishment means the breakdown and reassembly of a product if such activity is done on a product-by-product basis and if the finished product contains more than 30 percent of its original materials or components.
(e) First useful product. The term first useful product means the first product produced from the processing of solid waste in a solid waste disposal process that is useful for consumption in agricultural, consumer, commercial, governmental, or industrial operation or activity and that could be sold for such use, whether or not actually sold. A useful product includes both a product useful to an individual consumer as an ultimate end-use consumer product and a product useful to an industrial user as a material or input for processing in some stage of a manufacturing or production process to produce a different end-use consumer product. The determination of whether a useful product has been produced may take into account operational constraints that affect the point in production when a useful product reasonably can be extracted or isolated and sold independently. For this purpose, the costs of extracting, isolating, storing, and transporting the product to a market may only be taken into account as operational constraints if the product is not to be used as part of an integrated manufacturing or industrial process in the same location as that in which the product is produced.
(f) Preliminary function. A preliminary function is a function to collect, separate, sort, store, treat, process, disassemble, or handle solid waste that is preliminary to and directly related to a qualified solid waste disposal process.
(g) Mixed-use facilities—(1) In general. If a facility is used for both a qualified solid waste disposal function (including a qualified solid waste disposal process or a preliminary function) and a nonqualified function (a mixed-use facility), then the costs of the facility allocable to the qualified solid waste disposal function are determined using any reasonable method, based on all the facts and circumstances. See § 1.103-8(a)(1) for allocation rules on amounts properly allocable to an exempt facility. Facilities qualify as functionally related and subordinate to a qualified solid waste disposal function only to the extent that they are functionally related and subordinate to the portion of the mixed-use facility that is used for one or more qualified solid waste disposal functions (including a qualified solid waste disposal process or a preliminary function).
(2) Mixed inputs—(i) In general. Except as otherwise provided in paragraph (g)(2)(ii) of this section, for each facility (or a portion of a mixed-use facility) performing a qualified solid waste disposal process or a preliminary function, the percentage of the costs of the property used for such process that are allocable to a qualified solid waste disposal process or a preliminary function cannot exceed the average annual percentage of solid waste processed in that qualified solid waste disposal process or that preliminary function while the issue is outstanding. The annual percentage of solid waste processed in that qualified solid waste disposal process or preliminary function for any year is the percentage, by weight or volume, of the total materials processed in that qualified solid waste disposal process or preliminary function that constitute solid waste for that year.
(ii) Special rule for mixed-input processes if at least 65 percent of the materials processed are solid waste—(A) In general. Except as otherwise provided in paragraph (g)(2)(ii)(B) of this section, for each facility (or a portion of a mixed-use facility) performing a qualified solid waste disposal process or preliminary function, if the annual percentage of solid waste processed in that qualified solid waste disposal process or preliminary function for each year that the issue is outstanding (beginning with the date such facility is placed in service within the meaning of § 1.150-2(c)) equals at least 65 percent of the materials processed in that qualified solid waste disposal process or preliminary function, then all of the costs of the property used for such process are treated as allocable to a qualified solid waste disposal process. The annual percentage of solid waste processed in such qualified solid waste disposal process or preliminary function for any year is the percentage, by weight or volume, of the total materials processed in that qualified solid waste disposal process or preliminary function that constitute solid waste for that year.
(B) Special rule for extraordinary events. In the case of an extraordinary event that is beyond the control of the operator of a solid waste disposal facility (such as a natural disaster, strike, major utility disruption, or governmental intervention) and that causes a solid waste disposal facility to be unable to meet the 65 percent test under paragraph (g)(2)(ii)(A) of this section for a particular year, the percentage of solid waste processed for that year equals—
(1) The sum of the amount of solid waste processed in the solid waste disposal facility for the year affected by the extraordinary event and the amount of solid waste processed in the solid waste disposal facility during the following two years in excess of the amount required to meet the general 65 percent threshold for the facility during each of such two years; divided by
(2) The total materials processed in the solid waste disposal facility during the year affected by the extraordinary event. If the resulting measure of solid waste processed for the year affected by the extraordinary event equals at least 65 percent, then the facility is treated as meeting the requirements of the 65 percent test under paragraph (g)(2)(ii)(A) of this section for such year.
(iii) Facilities functionally related and subordinate to mixed-input facilities. Except to the extent that facilities are functionally related and subordinate to a mixed-input facility that meets the 65 percent test under paragraph (g)(2)(ii) of this section, facilities qualify as functionally related and subordinate to a mixed-input facility only to the extent that they are functionally related and subordinate to the qualified portion of the mixed-input facility that is used for one or more qualified solid waste disposal functions (including a qualified solid waste disposal process or a preliminary function).
(h) Examples. The following examples illustrate the application of this section:
(i) Effective/Applicability Dates—(1) In general. Except as otherwise provided in this paragraph (i), this section applies to bonds to which section 142 applies that are sold on or after October 18, 2011.
(2) Elective retroactive application. Issuers may apply this section, in whole, but not in part, to outstanding bonds to which section 142 applies and which were sold before October 18, 2011.
(3) Certain refunding bonds. An issuer need not apply this section to bonds that are issued in a current refunding to refund bonds to which this section does not apply if the weighted average maturity of the refunding bonds is no longer than the remaining weighted average maturity of the refunded bonds.
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Treas. Reg. §1.142(a)(6)-1(a)In general.
In general. This section defines the term solid waste disposal facility for purposes of section 142(a)(6).
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Treas. Reg. §1.142(a)(6)-1(b)Solid waste disposal facility.
Solid waste disposal facility. The term solid waste disposal facility means a facility to the extent that the facility—
(1) Processes solid waste (as defined in paragraph (c) of this section) in a qualified solid waste disposal process (as defined in paragraph (d) of this section);
(2) Performs a preliminary function (as defined in paragraph (f) of this section); or
(3) Is functionally related and subordinate (within the meaning of § 1.103-8(a)(3)) to a facility described in paragraph (b)(1) or (b)(2) of this section.
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Treas. Reg. §1.142(a)(6)-1(c)Solid waste—(1) In general.
Solid waste—(1) In general. Except to the extent excluded under paragraph (c)(2) of this section, for purposes of section 142(a)(6), the term solid waste means garbage, refuse, and other solid material derived from any agricultural, commercial, consumer, governmental, or industrial operation or activity if the material meets the requirements of both paragraph (c)(1)(i) and paragraph (c)(1)(ii) of this section. For purposes of this section, material is solid if it is solid at ambient temperature and pressure.
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Treas. Reg. §1.142(a)(6)-1(d)Qualified solid waste disposal process.
Qualified solid waste disposal process. The term qualified solid waste disposal process means the processing of solid waste in a final disposal process (as defined in paragraph (d)(1) of this section), an energy conversion process (as defined in paragraph (d)(2) of this section), or a recycling process (as defined in paragraph (d)(3) of this section). Absent an express restriction to the contrary in this section, a qualified solid waste disposal process may employ any biological, engineering, industrial, or technological method.
(1) Final disposal process. The term final disposal process means the placement of solid waste in a landfill (including, for this purpose, the spreading of solid waste over land in an environmentally compliant and safe manner with no intent to remove such solid waste), the incineration of solid waste without capturing any useful energy, or the containment of solid waste with a reasonable expectation as of the date of issue of the bonds that the containment will continue indefinitely and that the solid waste has no current or future beneficial use.
(2) Energy conversion process. The term energy conversion process means a thermal, chemical, or other process that is applied to solid waste to create and capture synthesis gas, heat, hot water, steam, or other useful energy. The energy conversion process begins at the point of the first application of such process. The energy conversion process ends at the point at which the useful energy is first created, captured, or incorporated into the form of synthesis gas, heat, hot water, or other useful energy and before any transfer or distribution of such synthesis gas, heat, hot water or other useful energy, regardless of whether such synthesis gas, heat, hot water, or other useful energy constitutes a first useful product within the meaning of paragraph (e) of this section.
(3) Recycling process—(i) In general. The term recycling process means reconstituting, transforming, or otherwise processing solid waste into a useful product. The recycling process begins at the point of the first application of a process to reconstitute or transform the solid waste into a useful product, such as decontamination, melting, re-pulping, shredding, or other processing of the solid waste to accomplish this purpose. The recycling process ends at the point of completion of production of the first useful product from the solid waste.
(ii) Refurbishment, repair, or similar activities. The term recycling process does not include refurbishment, repair, or similar activities. The term refurbishment means the breakdown and reassembly of a product if such activity is done on a product-by-product basis and if the finished product contains more than 30 percent of its original materials or components.
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Treas. Reg. §1.142(a)(6)-1(e)First useful product.
First useful product. The term first useful product means the first product produced from the processing of solid waste in a solid waste disposal process that is useful for consumption in agricultural, consumer, commercial, governmental, or industrial operation or activity and that could be sold for such use, whether or not actually sold. A useful product includes both a product useful to an individual consumer as an ultimate end-use consumer product and a product useful to an industrial user as a material or input for processing in some stage of a manufacturing or production process to produce a different end-use consumer product. The determination of whether a useful product has been produced may take into account operational constraints that affect the point in production when a useful product reasonably can be extracted or isolated and sold independently. For this purpose, the costs of extracting, isolating, storing, and transporting the product to a market may only be taken into account as operational constraints if the product is not to be used as part of an integrated manufacturing or industrial process in the same location as that in which the product is produced.
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Treas. Reg. §1.142(a)(6)-1(f)Preliminary function.
Preliminary function. A preliminary function is a function to collect, separate, sort, store, treat, process, disassemble, or handle solid waste that is preliminary to and directly related to a qualified solid waste disposal process.
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Treas. Reg. §1.142(a)(6)-1(g)Mixed-use facilities—(1) In general.
Mixed-use facilities—(1) In general. If a facility is used for both a qualified solid waste disposal function (including a qualified solid waste disposal process or a preliminary function) and a nonqualified function (a mixed-use facility), then the costs of the facility allocable to the qualified solid waste disposal function are determined using any reasonable method, based on all the facts and circumstances. See § 1.103-8(a)(1) for allocation rules on amounts properly allocable to an exempt facility. Facilities qualify as functionally related and subordinate to a qualified solid waste disposal function only to the extent that they are functionally related and subordinate to the portion of the mixed-use facility that is used for one or more qualified solid waste disposal functions (including a qualified solid waste disposal process or a preliminary function).
(2) Mixed inputs—(i) In general. Except as otherwise provided in paragraph (g)(2)(ii) of this section, for each facility (or a portion of a mixed-use facility) performing a qualified solid waste disposal process or a preliminary function, the percentage of the costs of the property used for such process that are allocable to a qualified solid waste disposal process or a preliminary function cannot exceed the average annual percentage of solid waste processed in that qualified solid waste disposal process or that preliminary function while the issue is outstanding. The annual percentage of solid waste processed in that qualified solid waste disposal process or preliminary function for any year is the percentage, by weight or volume, of the total materials processed in that qualified solid waste disposal process or preliminary function that constitute solid waste for that year.
(ii) Special rule for mixed-input processes if at least 65 percent of the materials processed are solid waste—(A) In general. Except as otherwise provided in paragraph (g)(2)(ii)(B) of this section, for each facility (or a portion of a mixed-use facility) performing a qualified solid waste disposal process or preliminary function, if the annual percentage of solid waste processed in that qualified solid waste disposal process or preliminary function for each year that the issue is outstanding (beginning with the date such facility is placed in service within the meaning of § 1.150-2(c)) equals at least 65 percent of the materials processed in that qualified solid waste disposal process or preliminary function, then all of the costs of the property used for such process are treated as allocable to a qualified solid waste disposal process. The annual percentage of solid waste processed in such qualified solid waste disposal process or preliminary function for any year is the percentage, by weight or volume, of the total materials processed in that qualified solid waste disposal process or preliminary function that constitute solid waste for that year.
(B) Special rule for extraordinary events. In the case of an extraordinary event that is beyond the control of the operator of a solid waste disposal facility (such as a natural disaster, strike, major utility disruption, or governmental intervention) and that causes a solid waste disposal facility to be unable to meet the 65 percent test under paragraph (g)(2)(ii)(A) of this section for a particular year, the percentage of solid waste processed for that year equals—
(1) The sum of the amount of solid waste processed in the solid waste disposal facility for the year affected by the extraordinary event and the amount of solid waste processed in the solid waste disposal facility during the following two years in excess of the amount required to meet the general 65 percent threshold for the facility during each of such two years; divided by
(2) The total materials processed in the solid waste disposal facility during the year affected by the extraordinary event. If the resulting measure of solid waste processed for the year affected by the extraordinary event equals at least 65 percent, then the facility is treated as meeting the requirements of the 65 percent test under paragraph (g)(2)(ii)(A) of this section for such year.
(iii) Facilities functionally related and subordinate to mixed-input facilities. Except to the extent that facilities are functionally related and subordinate to a mixed-input facility that meets the 65 percent test under paragraph (g)(2)(ii) of this section, facilities qualify as functionally related and subordinate to a mixed-input facility only to the extent that they are functionally related and subordinate to the qualified portion of the mixed-input facility that is used for one or more qualified solid waste disposal functions (including a qualified solid waste disposal process or a preliminary function).
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Treas. Reg. §1.142(a)(6)-1(h)Examples.
Examples. The following examples illustrate the application of this section:
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Treas. Reg. §1.142(a)(6)-1(i)Effective/Applicability Dates—(1) In general.
Effective/Applicability Dates—(1) In general. Except as otherwise provided in this paragraph (i), this section applies to bonds to which section 142 applies that are sold on or after October 18, 2011.
(2) Elective retroactive application. Issuers may apply this section, in whole, but not in part, to outstanding bonds to which section 142 applies and which were sold before October 18, 2011.
(3) Certain refunding bonds. An issuer need not apply this section to bonds that are issued in a current refunding to refund bonds to which this section does not apply if the weighted average maturity of the refunding bonds is no longer than the remaining weighted average maturity of the refunded bonds.
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Treas. Reg. §1.142(a)(6)-1(v)Radioactive material.
Radioactive material. Solid waste excludes any radioactive material subject to regulation under the Nuclear Regulatory Act (10 CFR 1.1 et seq.), as in effect on the issue date of the bonds.
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Treas. Reg. §1.142(f)(4)-1Manner of making election to terminate tax-exempt bond financing
(a) Overview. Section 142(f)(4) permits a person engaged in the local furnishing of electric energy or gas (a local furnisher) that uses facilities financed with exempt facility bonds under section 142(a)(8) and that expands its service area in a manner inconsistent with the requirements of sections 142(a)(8) and (f) to make an election to ensure that those bonds will continue to be treated as exempt facility bonds. The election must meet the requirements of paragraphs (b) and (c) of this section.
(b) Time for making election—(1) In general. An election under section 142(f)(4)(B) must be filed with the Internal Revenue Service on or before 90 days after the date of the service area expansion that causes bonds to cease to meet the requirements of sections 142(a)(8) and (f).
(2) Date of service area expansion. For the purposes of this section, the date of the service area expansion is the first date on which the local furnisher is authorized to collect revenue for the provision of service in the expanded area.
(c) Manner of making election. An election under section 142(f)(4)(B) must be captioned “ELECTION TO TERMINATE TAX-EXEMPT BOND FINANCING”, must be signed under penalties of perjury by a person who has authority to sign on behalf of the local furnisher, and must contain the following information—
(1) The name of the local furnisher;
(2) The tax identification number of the local furnisher;
(3) The complete address of the local furnisher;
(4) The date of the service area expansion;
(5) Identification of each bond issue subject to the election, including the complete name of each issue, the tax identification number of each issuer, the report number of the information return filed under section 149(e) for each issue, the issue date of each issue, the CUSIP number (if any) of the bond with the latest maturity of each issue, the issue price of each issue, the adjusted issue price of each issue as of the date of the election, the earliest date on which the bonds of each issue may be redeemed, and the principal amount of bonds of each issue to be redeemed on the earliest redemption date;
(6) A statement that the local furnisher making the election agrees to the conditions stated in section 142(f)(4)(B); and
(7) A statement that each issuer of the bonds subject to the election has received written notice of the election.
(d) Effect on section 150(b). Except as provided in paragraph (e) of this section, if a local furnisher files an election within the period specified in paragraph (b) of this section, section 150(b) does not apply to bonds identified in the election during and after that period.
(e) Effect of failure to meet agreements. If a local furnisher fails to meet any of the conditions stated in an election pursuant to paragraph (c)(6) of this section, the election is invalid.
(f) Corresponding provisions of the Internal Revenue Code of 1954. Section 103(b)(4)(E) of the Internal Revenue Code of 1954 set forth corresponding requirements for the exclusion from gross income of the interest on bonds issued for facilities for the local furnishing of electric energy or gas. For the purposes of this section any reference to sections 142(a)(8) and (f) of the Internal Revenue Code of 1986 includes a reference to the corresponding portion of section 103(b)(4)(E) of the Internal Revenue Code of 1954.
(g) Effective dates. This section applies to elections made on or after January 19, 2001.
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Treas. Reg. §1.142(f)(4)-1(a)Overview.
Overview. Section 142(f)(4) permits a person engaged in the local furnishing of electric energy or gas (a local furnisher) that uses facilities financed with exempt facility bonds under section 142(a)(8) and that expands its service area in a manner inconsistent with the requirements of sections 142(a)(8) and (f) to make an election to ensure that those bonds will continue to be treated as exempt facility bonds. The election must meet the requirements of paragraphs (b) and (c) of this section.
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Treas. Reg. §1.142(f)(4)-1(b)Time for making election—(1) In general.
Time for making election—(1) In general. An election under section 142(f)(4)(B) must be filed with the Internal Revenue Service on or before 90 days after the date of the service area expansion that causes bonds to cease to meet the requirements of sections 142(a)(8) and (f).
(2) Date of service area expansion. For the purposes of this section, the date of the service area expansion is the first date on which the local furnisher is authorized to collect revenue for the provision of service in the expanded area.
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Treas. Reg. §1.142(f)(4)-1(c)Manner of making election.
Manner of making election. An election under section 142(f)(4)(B) must be captioned “ELECTION TO TERMINATE TAX-EXEMPT BOND FINANCING”, must be signed under penalties of perjury by a person who has authority to sign on behalf of the local furnisher, and must contain the following information—
(1) The name of the local furnisher;
(2) The tax identification number of the local furnisher;
(3) The complete address of the local furnisher;
(4) The date of the service area expansion;
(5) Identification of each bond issue subject to the election, including the complete name of each issue, the tax identification number of each issuer, the report number of the information return filed under section 149(e) for each issue, the issue date of each issue, the CUSIP number (if any) of the bond with the latest maturity of each issue, the issue price of each issue, the adjusted issue price of each issue as of the date of the election, the earliest date on which the bonds of each issue may be redeemed, and the principal amount of bonds of each issue to be redeemed on the earliest redemption date;
(6) A statement that the local furnisher making the election agrees to the conditions stated in section 142(f)(4)(B); and
(7) A statement that each issuer of the bonds subject to the election has received written notice of the election.
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Treas. Reg. §1.142(f)(4)-1(d)Effect on section 150(b).
Effect on section 150(b). Except as provided in paragraph (e) of this section, if a local furnisher files an election within the period specified in paragraph (b) of this section, section 150(b) does not apply to bonds identified in the election during and after that period.
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Treas. Reg. §1.142(f)(4)-1(e)Effect of failure to meet agreements.
Effect of failure to meet agreements. If a local furnisher fails to meet any of the conditions stated in an election pursuant to paragraph (c)(6) of this section, the election is invalid.
19 Citing Cases
By contrast, we hold that for purposes of determining eligible basis in section 42, bond issuance costs are allocable to residential rental property, provided that they were incurred by reason of construction or production.
142 governs exempt facility bonds.