I
103D CONGRESS
1ST SESSION
H. R. 2022
To amend the Internal Revenue Code of 1986 to generally treat bonds
issued for section 501(c)(3) organizations in a manner similar to govern-
mental bonds.
IN THE HOUSE OF REPRESENTATIVES
MAY 6, 1993
Mr. MATSUI (for himself, Mr. RANGEL, Mr. JACOBS, Mrs. KENNELLY, Mr.
CARDIN, Mr. NEAL of Massachusetts, and Mr. MINETA) 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 generally
treat bonds issued for section 501(c)(3) organizations
in a manner similar to governmental bonds.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Nonprofit Organiza-
tions Tax-Exempt Bond Reform Act of 1993’’.
SEC. 2. TAX TREATMENT OF 501(c)(3) BONDS SIMILAR TO
GOVERNMENTAL BONDS.
(a) IN GENERAL.—Subsection (a) of section 150 of
the Internal Revenue Code of 1986 (relating to definitions
and special rules) is amended by striking paragraphs (2)
and (4), by redesignating paragraphs (5) and (6) as para-
graphs (4) and (5), respectively, and by inserting after
paragraph (1) the following new paragraph:
‘‘(2) EXEMPT PERSON.—
‘‘(A) IN GENERAL.—The term ‘exempt per-
son’ means—
‘‘(i) a governmental unit, or
‘‘(ii) a 501(c)(3) organization, but
only with respect to its activities which do
not constitute unrelated trades or busi-
nesses as determined by applying section
513(a).
‘‘(B) GOVERNMENTAL
UNIT
NOT
TO
IN-
CLUDE
FEDERAL
GOVERNMENT.—The term
‘governmental unit’ does not include the United
States or any agency or instrumentality thereof.
‘‘(C) 501(c)(3) ORGANIZATION.—The term
‘501(c)(3) organization’ means any organization
described in section 501(c)(3) and exempt from
tax under section 501(a).’’
(b) REPEAL OF QUALIFIED 501(c)(3) BOND DES-
IGNATION.—Section 145 of such Code (relating to quali-
fied 501(c)(3) bonds) is repealed.
(c) CONFORMING AMENDMENTS.—
(1) Paragraph (3) of section 141(b) of such
Code is amended—
(A) by striking ‘‘government use’’ in sub-
paragraph (A)(ii)(I) and subparagraph (B)(ii)
and inserting ‘‘exempt person use’’,
(B) by striking ‘‘a government use’’ in sub-
paragraph (B) and inserting ‘‘an exempt person
use’’,
(C) by striking ‘‘related business use’’ in
subparagraph (A)(ii)(II) and subparagraph (B)
and inserting ‘‘related private business use’’,
(D) by striking ‘‘RELATED BUSINESS USE’’
in the heading of subparagraph (B) and insert-
ing ‘‘RELATED PRIVATE BUSINESS USE’’, and
(E) by striking ‘‘GOVERNMENT USE’’ in the
heading thereof and inserting ‘‘EXEMPT PERSON
USE’’.
(2) Subparagraph (A) of section 141(b)(6) of
such Code is amended by striking ‘‘a governmental
unit’’ and inserting ‘‘an exempt person’’.
(3) Paragraph (7) of section 141(b) of such
Code is amended—
(A) by striking ‘‘government use’’ and in-
serting ‘‘exempt person use’’, and
(B) by striking ‘‘GOVERNMENT
USE’’ in
the heading thereof and inserting ‘‘EXEMPT
PERSON USE’’.
(4) Section 141(b) of such Code is amended by
striking paragraph (9).
(5) Paragraph (1) of section 141(c) of such
Code is amended by striking ‘‘governmental units’’
and inserting ‘‘exempt persons’’.
(6) Section 141 of such Code is amended by re-
designating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new
subsection:
‘‘(e) CERTAIN ISSUES USED TO PROVIDE RESIDEN-
TIAL RENTAL HOUSING FOR FAMILY UNITS.—
‘‘(1) IN GENERAL.—Except as provided in para-
graph (2), for purposes of this title, the term ‘pri-
vate activity bond’ includes any bond issued as part
of an issue if any portion of the net proceeds of the
issue are to be used (directly or indirectly) by an ex-
empt person described in section 150(a)(2)(A)(ii) to
provide residential rental property for family units.
‘‘(2) EXCEPTION FOR BONDS USED TO PROVIDE
QUALIFIED
RESIDENTIAL
RENTAL
PROJECTS.—
Paragraph (1) shall not apply to any bond issued as
part of an issue if the portion of such issue which
is to be used as described in paragraph (1) is to be
used to provide—
‘‘(A) a residential rental property for fam-
ily units if the first use of such property is pur-
suant to such issue,
‘‘(B) qualified residential rental projects
(as defined in section 142(d)), or
‘‘(C) property which is to be substantially
rehabilitated in a rehabilitation beginning with-
in the 2-year period ending 1 year after the
date of the acquisition of such property.
‘‘(3) SUBSTANTIAL REHABILITATION.—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), rules similar to the rules of
section 47(c)(1)(C) shall apply in determining
for purposes of paragraph (2)(C) whether prop-
erty is substantially rehabilitated.
‘‘(B) EXCEPTION.—For purposes of sub-
paragraph (A), clause (ii) of section 47(c)(1)(C)
shall not apply, but the Secretary may extend
the 24-month period in section 47(c)(1)(C)(i)
where appropriate due to circumstances not
within the control of the owner.
‘‘(4) CERTAIN
PROPERTY
TREATED
AS
NEW
PROPERTY.—Solely for purposes of determining