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.
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 ‘‘Taxpayer Bond Fair-
ness Act of 1996’’.
SEC. 
2. 
TREATMENT 
OF 
THE 
FURNISHING 
OF 
REC-
REATIONAL FITNESS SERVICES.
(a) UNRELATED
TRADE
OR
BUSINESS
TREAT-
MENT.—
(1) IN GENERAL.—Section 513 of the Internal
Revenue Code of 1986 (defining unrelated trade or
business) is amended by adding at the end the fol-
lowing new subsection:
‘‘(i) RECREATIONAL FITNESS SERVICES.—In the
case of a hospital described in section 170(b)(1)(A)(iii),
the term ‘unrelated trade or business’ includes any trade
or business which consists of providing physical fitness
services (including the use of facilities) to any individual
other than—
‘‘(1) an employee of such hospital, or
‘‘(2) as part of a course of rehabilitation or
therapy prescribed by a licensed physician or phys-
ical therapist to treat a physical injury or dysfunc-
tion.’’
(2) EFFECTIVE DATE.—The amendment made
by paragraph (1) shall apply to services provided
after June 30, 1996, in taxable years ending after
such date.
(b) DENIAL OF TAX-EXEMPT BOND FINANCING.—
(1) IN GENERAL.—Section 145 of such Code
(defining qualified 501(c)(3) bond) is amended by
redesignating subsection (e) as subsection (f) and by
inserting after subsection (d) the following new sub-
section:
‘‘(e) QUALIFIED 501(c) BONDS NOT TO INCLUDE
BONDS FINANCING RECREATIONAL FITNESS FACILI-
TIES.—
‘‘(1) IN GENERAL.—For purposes of this part,
the term ‘qualified 501(c)(3) bond’ shall not include
any bond issued as part of an issue if any portion
of the net proceeds of the issue are to be used di-
rectly or indirectly to provide any recreational fit-
ness facility.
‘‘(2) RECREATIONAL FITNESS FACILITY.—For
purposes of paragraph (1), the term ‘recreational fit-
ness facility’ means any facility owned or operated
by a hospital described in section 170(b)(1)(A)(iii) if
any of the income from the use of the facility, or
from services provided at the facility, would be in-
come of such hospital from an unrelated trade or
business (as defined in section 513).’’
(2) EFFECTIVE DATE.—
(A) IN GENERAL.—The amendment made
by paragraph (1) shall apply to obligations is-
sued after July 12, 1996.
(B) EXCEPTION.—The amendment made
by paragraph (1) shall not apply to obligations
issued to refund (or issued as part of a series
of obligations issued to refund) an obligation is-
sued on or before such date if the requirements
of section 144(a)(12)(A)(i) of the Internal Rev-
enue Code of 1986 are met.
Æ