I

104TH CONGRESS

2D SESSION H. R. 3801

To amend the Internal Revenue Code of 1986 to provide that the furnishing

of recreational fitness services by tax-exempt hospitals shall be treated

as an unrelated trade or business and that tax-exempt bonds may not

be used to provide facilities for such services.

IN THE HOUSE OF REPRESENTATIVES

JULY 12, 1996

Mr. KLECZKA (for himself and Mr. SENSENBRENNER) introduced the

following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to provide

that the furnishing of recreational fitness services by

tax-exempt hospitals shall be treated as an unrelated

trade or business and that tax-exempt bonds may not

be used to provide facilities for such services.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Taxpayer Bond Fair5 ness Act of 1996’’.
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1 SEC. 2. TREATMENT OF THE FURNISHING OF REC2 REATIONAL FITNESS SERVICES.

3 (a) UNRELATED TRADE OR BUSINESS TREAT4 MENT.—

5 (1) IN GENERAL.—Section 513 of the Internal

6 Revenue Code of 1986 (defining unrelated trade or

7 business) is amended by adding at the end the fol8 lowing new subsection:

9 ‘‘(i) RECREATIONAL FITNESS SERVICES.—In the

10 case of a hospital described in section 170(b)(1)(A)(iii),

11 the term ‘unrelated trade or business’ includes any trade

12 or business which consists of providing physical fitness

13 services (including the use of facilities) to any individual

14 other than—

15 ‘‘(1) an employee of such hospital, or

16 ‘‘(2) as part of a course of rehabilitation or

17 therapy prescribed by a licensed physician or phys18 ical therapist to treat a physical injury or dysfunc19 tion.’’

20 (2) EFFECTIVE DATE.—The amendment made

21 by paragraph (1) shall apply to services provided

22 after June 30, 1996, in taxable years ending after

23 such date.

24 (b) DENIAL OF TAX-EXEMPT BOND FINANCING.—

25 (1) IN GENERAL.—Section 145 of such Code

26 (defining qualified 501(c)(3) bond) is amended by
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1 redesignating subsection (e) as subsection (f) and by

2 inserting after subsection (d) the following new sub3 section:

4 ‘‘(e) QUALIFIED 501(c) BONDS NOT TO INCLUDE

5 BONDS FINANCING RECREATIONAL FITNESS FACILI6 TIES.—

7 ‘‘(1) IN GENERAL.—For purposes of this part,

8 the term ‘qualified 501(c)(3) bond’ shall not include

9 any bond issued as part of an issue if any portion

10 of the net proceeds of the issue are to be used di11 rectly or indirectly to provide any recreational fit12 ness facility.

13 ‘‘(2) RECREATIONAL FITNESS FACILITY.—For

14 purposes of paragraph (1), the term ‘recreational fit15 ness facility’ means any facility owned or operated

16 by a hospital described in section 170(b)(1)(A)(iii) if

17 any of the income from the use of the facility, or

18 from services provided at the facility, would be in19 come of such hospital from an unrelated trade or

20 business (as defined in section 513).’’

21 (2) EFFECTIVE DATE.—

22 (A) IN GENERAL.—The amendment made

23 by paragraph (1) shall apply to obligations is24 sued after July 12, 1996.
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1 (B) EXCEPTION.—The amendment made

2 by paragraph (1) shall not apply to obligations

3 issued to refund (or issued as part of a series

4 of obligations issued to refund) an obligation is5 sued on or before such date if the requirements

6 of section 144(a)(12)(A)(i) of the Internal Rev7 enue Code of 1986 are met.

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