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users of the pipeline for sewage disposal appear to use that
facility on a generally equivalent basis.
Respondent seems to suggest that we focus on Company’s
particular use, i.e., its use of the wastewater from the
pipeline, and whether members of the general public use the
wastewater on the same basis as Company. We do not believe that
is the appropriate inquiry under section 1.141-3(b)(7)(ii),
Income Tax Regs. This special rule focuses on whether the
financed pipeline is available for use by the general public. We
conclude that it is since the sewage ratepayers’ sewage disposal
use is as members of the general public. Their use is
unobstructed by any incidental use and rights that Company may
have to the wastewater following its disposal through the
pipeline. Accordingly, section 1.141-3(b)(7)(ii), Income Tax
Regs., does not apply, and the special economic benefit that
Company receives from the pipeline is not sufficient alone to
give rise to a private business use.
Even if we were to assume that petitioner’s arrangement with
Company is a private business use of the pipeline, respondent’s
determination raises significant questions as to whether such use
exceeds 10 percent of the bond proceeds. Respondent determined:
In this case, one requirement imposed by Company
is that approximately C gallons of wastewater be
delivered each day to the geyser field during the term
of the Contract. This represents a reservation of
about 27% of the capacity of the Multi-Use Pipeline and
nearly 100% of the Geyser Field Pipeline. This special
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