- 21 -
statutory threshold and the specific exceptions under the
regulations.18 Indeed, in the paragraph following the language
that petitioner relies upon in the General Explanation, the Staff
of the Joint Committee states at 1152:
“To accomplish this, the Act generally defines as
a private activity (i.e., nongovernmental) bond any
bond of which more than 10 percent of the proceeds is
to be used in a trade or business of any person or
persons other than a governmental unit”. [Emphasis
added.]
The statute, as finally enacted, demonstrates that the intended
exception of de minimis and incidental usage was accomplished, at
least in part, with the implementation of the 10-percent
threshold.19 Nevertheless, this does not indicate, as respondent
18See sec. 1.141-3(b)(4)(iii)(A), Income Tax Regs., which
excepts arrangements from the definition of a management contract
if they are “solely incidental to the primary governmental
function or functions of a financed facility”; sec. 1.141-
3(d)(2), Income Tax Regs., which excepts use incidental to
financing arrangements; and sec. 1.141-3(d)(5), Income Tax Regs.,
which provides that incidental uses of a financed facility are
disregarded to the extent that those uses do not exceed 2.5
percent of the proceeds used to finance the facility.
19Sec. 103(b)(2)(A) of the 1954 Code employed a trade or
business test similar to the private business use test in sec.
141(b)(1). That provision prohibited private business use
involving a “major portion” of bond proceeds. Regulations under
that section provided that use of more than 25 percent of bond
proceeds represented use of a “major portion”. Sec. 1.103-
7(b)(3)(iii), Income Tax Regs., 37 Fed. Reg. 15487 (Aug. 3,
1972). The Senate amendment preceding the enactment of the Tax
Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085, proposed to
amend sec. 103(b)(2)(A) to incorporate this 25-percent threshold.
However, the 10-percent threshold was ultimately adopted. H.
Conf. Rept. 99-841 (Vol. II), at II-687 (1986), 1986-3 C.B. (Vol.
4) 1, 687.
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