PRIVATE BUSINESS USE: A PRIMER I. GENERALLY 1. What is cprivate business use d?
Private business use means: use (directly or indirectly) of the cfacilities d (the facilities financed by, or the proceeds of, a tax-exempt financing) in a ctrade or business d (any activity carried on by a person other than a natural person) carried on by a cnonqualified user d (any user other than a cqualified user, d as defined below) A cqualified user d is a state or local governmental unit or, in certain circumstances, a nonprofit, charitable organization described in Section 501(c)(3) of the Internal Revenue Code (a c501(c)(3) Organization d) using facilities in furtherance of its tax exempt purpose. NOTE: the federal government and its agencies are NOT considered qualified users! 2.
Why does private business use matter? Excessive private business use of the proceeds of facilities financed with tax-exempt bonds may cause the interest on the tax-exempt bonds to be taxable to the holder of the bonds. For financings by state and local governments or their agencies, private business use related to the qualifying use of the proceeds or facility is limited to 10% or less of the proceeds of facilities financed with tax exempt bonds.
Private ... more. less.