Internal Revenue Code – Section 145

Sec. 145. Qualified 501(c)(3) bond

-STATUTE-

(a) In general

For purposes of this part, except as otherwise provided in this

section, the term "qualified 501(c)(3) bond" means any private

activity bond issued as part of an issue if -

(1) all property which is to be provided by the net proceeds of

the issue is to be owned by a 501(c)(3) organization or a

governmental unit, and

(2) such bond would not be a private activity bond if -

(A) 501(c)(3) organizations were treated as governmental

units with respect to their activities which do not constitute

unrelated trades or businesses, determined by applying section

513(a), and

(B) paragraphs (1) and (2) of section 141(b) were applied by

substituting "5 percent" for "10 percent" each place it appears

and by substituting "net proceeds" for "proceeds" each place it

appears.

(b) $150,000,000 limitation on bonds other than hospital bonds

(1) In general

A bond (other than a qualified hospital bond) shall not be

treated as a qualified 501(c)(3) bond if the aggregate authorized

face amount of the issue (of which such bond is a part) allocated

to any 501(c)(3) organization which is a test-period beneficiary

(when increased by the outstanding tax-exempt nonhospital bonds

of such organization) exceeds $150,000,000.

(2) Outstanding tax-exempt nonhospital bonds

(A) In general

For purposes of applying paragraph (1) with respect to any

issue, the outstanding tax-exempt nonhospital bonds of any

organization which is a test-period beneficiary with respect to

such issue is the aggregate amount of tax-exempt bonds referred

to in subparagraph (B) -

(i) which are allocated to such organization, and

(ii) which are 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).

(B) Bonds taken into account

For purposes of subparagraph (A), the bonds referred to in

this subparagraph are -

(i) any qualified 501(c)(3) bond other than a qualified

hospital bond, and

(ii) any bond to which section 141(a) does not apply if -

(I) such bond would have been an industrial development

bond (as defined in section 103(b)(2), as in effect on the

day before the date of the enactment of the Tax Reform Act

of 1986) if 501(c)(3) organizations were not exempt

persons, and

(II) such bond was not described in paragraph (4), (5),

or (6) of such section 103(b) (as in effect on the date

such bond was issued).

(C) Only nonhospital portion of bonds taken into account

(i) In general

A bond shall be taken into account under subparagraph (B)

only to the extent that the proceeds of the issue of which

such bond is a part are not used with respect to a hospital.

(ii) Special rule

If 90 percent or more of the net proceeds of an issue are

used with respect to a hospital, no bond which is part of

such issue shall be taken into account under subparagraph

(B)(ii).

(3) Aggregation rule

For purposes of this subsection, 2 or more organizations under

common management or control shall be treated as 1 organization.

(4) Allocation of face amount of issue; test-period beneficiary

Rules similar to the rules of subparagraphs (C), (D), and (E)

of section 144(a)(10) shall apply for purposes of this

subsection.

(5) Termination of limitation

This subsection shall not apply with respect to bonds issued

after the date of the enactment of this paragraph as part of an

issue 95 percent or more of the net proceeds of which are to be

used to finance capital expenditures incurred after such date.

(c) Qualified hospital bond

For purposes of this section, the term "qualified hospital bond"

means any bond issued as part of an issue 95 percent or more of the

net proceeds of which are to be used with respect to a hospital.

(d) Restrictions on bonds used to provide residential rental

housing for family units

(1) In general

Except as otherwise provided in this subsection, a bond which

is part of an issue shall not be a qualified 501(c)(3) bond if

any portion of the net proceeds of the issue are to be used

directly or indirectly to provide residential rental property for

family units.

(2) Exception for bonds used to provide qualified residential

rental projects

Paragraph (1) shall not apply to any bond issued as part of an

issue if the portion of such issue which is to be used as

described in paragraph (1) is to be used to provide -

(A) a residential rental property for family units if the

first use of such property is pursuant to such issue,

(B) qualified residential rental projects (as defined in

section 142(d)), or

(C) property which is to be substantially rehabilitated in a

rehabilitation beginning within the 2-year period ending 1 year

after the date of the acquisition of such property.

(3) Certain property treated as new property

Solely for purposes of determining under paragraph (2)(A)

whether the 1st use of property is pursuant to tax-exempt

financing -

(A) In general

If -

(i) the 1st use of property is pursuant to taxable

financing,

(ii) there was a reasonable expectation (at the time such

taxable financing was provided) that such financing would be

replaced by tax-exempt financing, and

(iii) the taxable financing is in fact so replaced within a

reasonable period after the taxable financing was provided,

 

then the 1st use of such property shall be treated as being

pursuant to the tax-exempt financing.

(B) Special rule where no operating State or local program for

tax-exempt financing

If, at the time of the 1st use of property, there was no

operating State or local program for tax-exempt financing of

the property, the 1st use of the property shall be treated as

pursuant to the 1st tax-exempt financing of the property.

(C) Definitions

For purposes of this paragraph -

(i) Tax-exempt financing

The term "tax-exempt financing" means financing provided by

tax-exempt bonds.

(ii) Taxable financing

The term "taxable financing" means financing which is not

tax-exempt financing.

(4) Substantial rehabilitation

(A) In general

Except as provided in subparagraph (B), rules similar to the

rules of section 47(c)(1)(C) shall apply in determining for

purposes of paragraph (2)(C) whether property is substantially

rehabilitated.

(B) Exception

For purposes of subparagraph (A), clause (ii) of section

47(c)(1)(C) shall not apply, but the Secretary may extend the

24-month period in section 47(c)(1)(C)(i) where appropriate due

to circumstances not within the control of the owner.

(e) Election out

This section shall not apply to an issue if -

(1) the issuer elects not to have this section apply to such

issue, and

(2) such issue is an issue of exempt facility bonds, or

qualified redevelopment bonds, to which section 146 applies.

 

-SOURCE-

(Added Pub. L. 99-514, title XIII, Sec. 1301(b), Oct. 22, 1986, 100

Stat. 2629; amended Pub. L. 100-647, title I, Sec. 1013(a)(6)-(8),

title V, Sec. 5053(a), Nov. 10, 1988, 102 Stat. 3538, 3677; Pub. L.

101-239, title VII, Sec. 7815(f), Dec. 19, 1989, 103 Stat. 2419;

Pub. L. 101-508, title XI, Sec. 11813(b)(7), Nov. 5, 1990, 104

Stat. 1388-551; Pub. L. 105-34, title II, Sec. 222, Aug. 5, 1997,

111 Stat. 818.)

 

-REFTEXT-

REFERENCES IN TEXT

The date of the enactment of the Tax Reform Act of 1986, referred

to in subsec. (b)(2)(B)(ii)(I), is the date of enactment of Pub. L.

99-514, which was approved Oct. 22, 1986.

The date of the enactment of this paragraph, referred to in

subsec. (b)(5), is the date of enactment of Pub. L. 105-34, which

was approved Aug. 5, 1997.

 

 

-MISC1-

PRIOR PROVISIONS

A prior section 145, act Aug. 16, 1954, ch. 736, 68A Stat. 42,

made a cross reference to section 36 of this title, prior to repeal

by Pub. L. 95-30, title I, Sec. 101(d)(1), May 23, 1977, 91 Stat.

133, applicable to taxable years beginning after Dec. 31, 1976.

 

AMENDMENTS

1997 - Subsec. (b)(5). Pub. L. 105-34 added par. (5).

1990 - Subsec. (d)(4). Pub. L. 101-508 substituted "section

47(c)(1)(C)" for "section 48(g)(1)(C)" wherever appearing and

"section 47(c)(1)(C)(i)" for "section 48(g)(1)(C)(i)".

1989 - Subsec. (d)(3), (4). Pub. L. 101-239 added par. (3) and

redesignated former par. (3) as (4).

1988 - Subsec. (b)(2)(B)(ii)(I). Pub. L. 100-647, Sec.

1013(a)(6), substituted "section 103(b)(2)" for "section 103(b)".

Subsec. (b)(2)(C)(i). Pub. L. 100-647, Sec. 1013(a)(7),

substituted "subparagraph (B)" for "subparagraph (B)(ii)".

Subsec. (b)(4). Pub. L. 100-647, Sec. 1013(a)(8), substituted

"subparagraphs (C), (D), and (E)" for "subparagraphs (C) and (D)".

Subsecs. (d), (e). Pub. L. 100-647, Sec. 5053(a), added subsec.

(d) and redesignated former subsec. (d) as (e).

 

EFFECTIVE DATE OF 1990 AMENDMENT

Amendment by Pub. L. 101-508 applicable to property placed in

service after Dec. 31, 1990, but not applicable to any transition

property (as defined in section 49(e) of this title), any property

with respect to which qualified progress expenditures were

previously taken into account under section 46(d) of this title,

and any property described in section 46(b)(2)(C) of this title, as

such sections were in effect on Nov. 4, 1990, see section 11813(c)

of Pub. L. 101-508, set out as a note under section 45K of this

title.

 

EFFECTIVE DATE OF 1989 AMENDMENT

Amendment by Pub. L. 101-239 effective, except as otherwise

provided, as if included in the provision of the Technical and

Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such

amendment relates, see section 7817 of Pub. L. 101-239, set out as

a note under section 1 of this title.

 

EFFECTIVE DATE OF 1988 AMENDMENT

Amendment by section 1013(a)(6)-(8) of Pub. L. 100-647 effective,

except as otherwise provided, as if included in the provision of

the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment

relates, see section 1019(a) of Pub. L. 100-647, set out as a note

under section 1 of this title.

Section 5053(c) of Pub. L. 100-647 provided that:

"(1) In general. - The amendments made by this section [amending

this section and section 148 of this title] shall apply to

obligations issued after October 21, 1988.

"(2) Exception for construction or binding agreement. -

"(A) The amendments made by this section shall not apply to

bonds (other than refunding bonds) with respect to a facility -

"(i)(I) the original use of which begins with the taxpayer,

and the construction, reconstruction, or rehabilitation of

which began before July 14, 1988, and was completed on or after

such date, or

"(II) the original use of which begins with the taxpayer and

with respect to which a binding contract to incur significant

expenditures for construction, reconstruction, or

rehabilitation was entered into before July 14, 1988, and some

of such expenditures are incurred on or after such date, and

"(ii) described in an inducement resolution or other

comparable preliminary approval adopted by an issuing authority

(or by a voter referendum) before July 14, 1988.

For purposes of the preceding sentence, the term 'significant

expenditures' means expenditures greater than 10 percent of the

reasonably anticipated cost of the construction, reconstruction,

or rehabilitation of the facility involved.

"(B) Subparagraph (A) shall not apply to any bond issued after

December 31, 1989, and shall not apply unless it is reasonably

expected (at the time of issuance of the bond) that the facility

will be placed in service before January 1, 1990.

"(3) Refundings. - The amendments made by this section shall not

apply to any bond issued to refund (or which is part of a series of

bonds issued to refund) a bond issued before July 15, 1988, if -

"(A) the average maturity date of the issue of which the

refunding bond is a part is not later than the average maturity

date of the bonds to be refunded by such issue,

"(B) the amount of the refunding bond does not exceed the

outstanding amount of the refunded bond, and

"(C) the 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) of the 1986 Code."

 

SAVINGS PROVISION

For provisions that nothing in amendment by Pub. L. 101-508 be

construed to affect treatment of certain transactions occurring,

property acquired, or items of income, loss, deduction, or credit

taken into account prior to Nov. 5, 1990, for purposes of

determining liability for tax for periods ending after Nov. 5,

1990, see section 11821(b) of Pub. L. 101-508, set out as a note

under section 45K of this title.

 

-End-