II

105TH CONGRESS

1ST SESSION S. 1513

To amend the Internal Revenue Code of 1986 to provide for the treatment

of tax-exempt bond financing of certain electrical output facilities.

IN THE SENATE OF THE UNITED STATES

NOVEMBER 10, 1997

Mr. MURKOWSKI introduced the following bill; which was read twice and

referred to the Committee on Finance

A BILL

To amend the Internal Revenue Code of 1986 to provide

for the treatment of tax-exempt bond financing of certain

electrical output facilities.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. TREATMENT OF TAX-EXEMPT BOND FINANCING

4 OF CERTAIN ELECTRICAL OUTPUT FACILI5 TIES.

6 (a) CERTAIN TRANSACTIONS TREATED AS SALES TO

7 GENERAL PUBLIC FOR PURPOSES OF PRIVATE BUSINESS

8 TESTS.—Paragraph (8) of section 141(b) of the Internal

9 Revenue Code of 1986 (defining nonqualified amount) is

10 amended to read as follows:
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1 ‘‘(8) NONQUALIFIED AMOUNT.—For purposes

2 of this subsection—

3 ‘‘(A) IN GENERAL.—The term ‘non4 qualified amount’ means, with respect to an

5 issue, the lesser of—

6 ‘‘(i) the proceeds of such issue which

7 are to be used for any private business use,

8 or

9 ‘‘(ii) the proceeds of such issue with

10 respect to which there are payments (or

11 property or borrowed money) described in

12 paragraph (2).

13 ‘‘(B) USE PURSUANT TO CERTAIN TRANS14 ACTIONS NOT TAKEN INTO ACCOUNT.—There

15 shall not be taken into account in determining

16 a nonqualified amount with respect to an issue

17 5 percent or more of the proceeds of which are

18 to be used with respect to any output facility

19 furnishing electric energy any of the following

20 transactions:

21 ‘‘(i) The sale of output by such facil22 ity to another State or local government

23 output facility for resale by such other fa24 cility if such other facility is not participat25 ing in an open access plan (as defined in
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1 subsection (f)(3)) and the output is to be

2 used for government use.

3 ‘‘(ii) Participation by such facility in

4 an output exchange agreement with other

5 output facilities if—

6 ‘‘(I) such facility is not a net sell7 er of output under such agreement de8 termined on not more than an annual

9 basis,

10 ‘‘(II) such agreement does not in11 volve output-type contracts, and

12 ‘‘(III) the purpose of the agree13 ment is to enable the facilities to sat14 isfy differing peak load demands or to

15 accommodate temporary outages.

16 ‘‘(iii) The sale of excess output by

17 such facility pursuant to a single agree18 ment of not more than 30 days duration,

19 other than through an output contract

20 with specific purchasers.

21 ‘‘(iv) The sale of excess output by

22 such facility not to exceed $1,000,000.’’.

23 (b) ELECTION TO TERMINATE TAX-EXEMPT BOND

24 FINANCING BY CERTAIN ELECTRICAL OUTPUT FACILI25 TIES.—Section 141 of the Internal Revenue Code of 1986
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1 (relating to private activity bond; qualified bond) is

2 amended by adding at the end the following:

3 ‘‘(f) ELECTION TO TERMINATE TAX-EXEMPT BOND

4 FINANCING BY CERTAIN ELECTRICAL OUTPUT FACILI5 TIES.—

6 ‘‘(1) IN GENERAL.—In the case of an output

7 facility for the furnishing of electric energy financed

8 with bonds which would cease to be tax-exempt as

9 the result of the participation by such facility in an

10 open access plan, such bonds shall not cease to be

11 tax-exempt bonds if the person engaged in such fur12 nishing by such facility makes an election described

13 in paragraph (2). Such election shall be irrevocable

14 and binding on any successor in interest to such per15 son.

16 ‘‘(2) ELECTION.—An election is described in

17 this paragraph if it is an election made in such man18 ner as the Secretary prescribes, and such person

19 agrees that—

20 ‘‘(A) such election is made with respect to

21 all output facilities for the furnishing of electric

22 energy by such person,

23 ‘‘(B) no bond exempt from tax under sec24 tion 103 may be issued on or after the date of

25 the participation by such facilities in an open
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1 access plan with respect to all such facilities of

2 such person, and

3 ‘‘(C) such outstanding bonds used to fi4 nance such facilities for such person are re5 deemed not later than 6 months after—

6 ‘‘(i) in the case of bonds issued before

7 December 1, 1997, the later of—

8 ‘‘(I) the earliest date on which

9 such bonds may be redeemed, or

10 ‘‘(II) the date of the election, and

11 ‘‘(ii) in the case of bonds issued after

12 November 30, 1997, and before the date of

13 the participation by such facility in an

14 open access plan, the earlier of—

15 ‘‘(I) the earliest date on which

16 such bonds may be redeemed, or

17 ‘‘(II) the date which is 10 years

18 after the date of the enactment of this

19 subsection.

20 ‘‘(3) OPEN ACCESS PLAN.—For purposes of this

21 subsection, the term ‘open access plan’ means—

22 ‘‘(A) a plan by a State to allow more than

23 1 electric energy provider to offer such energy

24 in a State authorized competitive market, or
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1 ‘‘(B) a plan established or approved by an

2 order issued by the Federal Energy Regulatory

3 Commission which requires or allows trans4 mission of electric energy on behalf of another

5 person.

6 ‘‘(4) RELATED PERSONS.—For purposes of this

7 subsection, the term ‘person’ includes a group of re8 lated persons (within the meaning of section

9 144(a)(3)) which includes such person.’’.

10 (c) EFFECTIVE DATE.—The amendments made by

11 this section shall apply to sales of output after November

12 8, 1997.

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