26 U.S.C. § 142 - Exempt facility bond
|Cite as:||26 U.S.C. § 142|
|Currency:||Current through P.L. 116-158 (08/14/2020)|
(a) General rule
For purposes of this part, the term "exempt facility bond" means any bond issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide-
(2) docks and wharves,
(3) mass commuting facilities,
(4) facilities for the furnishing of water,
(5) sewage facilities,
(6) solid waste disposal facilities,
(7) qualified residential rental projects,
(8) facilities for the local furnishing of electric energy or gas,
(9) local district heating or cooling facilities,
(10) qualified hazardous waste facilities,
(11) high-speed intercity rail facilities,
(12) environmental enhancements of hydroelectric generating facilities,
(13) qualified public educational facilities,
(14) qualified green building and sustainable design projects, or
(15) qualified highway or surface freight transfer facilities.
(b) Special exempt facility bond rules
For purposes of subsection (a)-
(1) Certain facilities must be governmentally owned
(A) In general
A facility shall be treated as described in paragraph (1), (2), (3), or (12) of subsection (a) only if all of the property to be financed by the net proceeds of the issue is to be owned by a governmental unit.
(B) Safe harbor for leases and management contracts
For purposes of subparagraph (A), property leased by a governmental unit shall be treated as owned by such governmental unit if-
(i) the lessee makes an irrevocable election (binding on the lessee and all successors in interest under the lease) not to claim depreciation or an investment credit with respect to such property,
(ii) the lease term (as defined in section 168(i)(3)) is not more than 80 percent of the reasonably expected economic life of the property (as determined under section 147(b)), and
(iii) the lessee has no option to purchase the property other than at fair market value (as of the time such option is exercised).
Rules similar to the rules of the preceding sentence shall apply to management contracts and similar types of operating agreements.
(2) Limitation on office space
An office shall not be treated as described in a paragraph of subsection (a) unless-
(A) the office is located on the premises of a facility described in such a paragraph, and
(B) 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.
(c) Airports, docks and wharves, mass commuting facilities and high-speed intercity rail facilities
For purposes of subsection (a)-
(1) Storage and training facilities
Storage or training facilities directly related to a facility described in paragraph (1), (2), (3) or (11) of subsection (a) shall be treated as described in the paragraph in which such facility is described.
(2) Exception for certain private facilities
Property shall not be treated as described in paragraph (1), (2), (3) or (11) of subsection (a) if such property is described in any of the following subparagraphs and is to be used for any private business use (as defined in section 141(b)(6)).
(A) Any lodging facility.
(B) Any retail facility (including food and beverage facilities) in excess of a size necessary to serve passengers and employees at the exempt facility.
(C) Any retail facility (other than parking) for passengers or the general public located outside the exempt facility terminal.
(D) Any office building for individuals who are not employees of a governmental unit or of the operating authority for the exempt facility.
(E) Any industrial park or manufacturing facility.
(d) Qualified residential rental project
For purposes of this section-
(1) In general
The term "qualified residential rental project" means any project for residential rental property if, at all times during the qualified project period, such project meets the requirements of subparagraph (A) or (B), whichever is elected by the issuer at the time of the issuance of the issue with respect to such project:
(A) 20-50 test
The project meets the requirements of this subparagraph if 20 percent or more of the residential units in such project are occupied by individuals whose income is 50 percent or less of area median gross income.
(B) 40-60 test
The project meets the requirements of this subparagraph if 40 percent or more of the residential units in such project are occupied by individuals whose income is 60 percent or less of area median gross income.
For purposes of this paragraph, any property shall not be treated as failing to be residential rental property merely because part of the building in which such property is located is used for purposes other than residential rental purposes.
(2) Definitions and special rules
For purposes of this subsection-
(A) Qualified project period
The term "qualified project period" means the period beginning on the 1st day on which 10 percent of the residential units in the project are occupied and ending on the latest of-
(i) the date which is 15 years after the date on which 50 percent of the residential units in the project are occupied,
(ii) the 1st day on which no tax-exempt private activity bond issued with respect to the project is outstanding, or
(iii) the date on which any assistance provided with respect to the project under section 8 of the United States Housing Act of 1937 terminates.
(B) Income of individuals; area median gross income
(i) In general
The income of individuals and area median gross income shall be determined by the Secretary in a manner consistent with determinations of lower income families and area median gross income under section 8 of the United States Housing Act of 1937 (or, if such program is terminated, under such program as in effect immediately before such termination). Determinations under the preceding sentence shall include adjustments for family size. Subsections (g) and (h) of section 7872 shall not apply in determining the income of individuals under this subparagraph.
(ii) Special rule relating to basic housing allowances
For purposes of determining income under this subparagraph, payments under section 403 of title 37, United States Code, as a basic pay allowance for housing shall be disregarded with respect to any qualified building.
(iii) Qualified building
For purposes of clause (ii), the term "qualified building" means any building located-
(I) in any county in which is located a qualified military installation to which the number of members of the Armed Forces of the United States assigned to units based out of such qualified military installation, as of June 1, 2008, has increased by not less than 20 percent, as compared to such number on December 31, 2005, or
(II) in any county adjacent to a county described in subclause (I).
(iv) Qualified military installation
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.
(D) Single-room occupancy units
A unit shall not fail to be treated as a residential unit merely because such unit is a single-room occupancy unit (within the meaning of section 42).
(E) Hold harmless for reductions in area median gross income
(i) In general
Any determination of area median gross income under subparagraph (B) with respect to any project for any calendar year after 2008 shall not be less than the area median gross income determined under such subparagraph with respect to such project for the calendar year preceding the calendar year for which such determination is made.
(ii) Special rule for certain census changes
In the case of a HUD hold harmless impacted project, the area median gross income with respect to such project for any calendar year after 2008 (hereafter in this clause referred to as the current calendar year) shall be the greater of the amount determined without regard to this clause or the sum of-
(I) the area median gross income determined under the HUD hold harmless policy with respect to such project for calendar year 2008, plus
(II) any increase in the area median gross income determined under subparagraph (B) (determined without regard to the HUD hold harmless policy and this subparagraph) with respect to such project for the current calendar year over the area median gross income (as so determined) with respect to such project for calendar year 2008.
(iii) HUD hold harmless policy
The term "HUD hold harmless policy" means the regulations under which a policy similar to the rules of clause (i) applied to prevent a change in the method of determining area median gross income from resulting in a reduction in the area median gross income determined with respect to certain projects in calendar years 2007 and 2008.
(iv) HUD hold harmless impacted project
The term "HUD hold harmless impacted project" means any project with respect to which area median gross income was determined under subparagraph (B) for calendar year 2007 or 2008 if such determination would have been less but for the HUD hold harmless policy.
(3) Current income determinations
For purposes of this subsection-
(A) In general
The determination of whether the income of a resident of a unit in a project exceeds the applicable income limit shall be made at least annually on the basis of the current income of the resident. The preceding sentence shall not apply with respect to any project for any year if during such year no residential unit in the project is occupied by a new resident whose income exceeds the applicable income limit.
(B) Continuing resident's income may increase above the applicable limit
If the income of a resident of a unit in a project did not exceed the applicable income limit upon commencement of such resident's occupancy of such unit (or as of any prior determination under subparagraph (A)), the income of such resident shall be treated as continuing to not exceed the applicable income limit. The preceding sentence shall cease to apply to any resident whose income as of the most recent determination under subparagraph (A) exceeds 140 percent of the applicable income limit if after such determination, but before the next determination, any residential unit of comparable or smaller size in the same project is occupied by a new resident whose income exceeds the applicable income limit.
To continue readingFREE SIGN UP