ing ‘‘which is a bond issued for an exempt per-
son described in section 150(a)(2)(A)(i)’’, and
(B) by adding at the end thereof the fol-
lowing new sentence: ‘‘Subparagraph (D) shall
not apply to any bond which is not a private ac-
tivity bond but which would be such a bond if
the 501(c)(3) organization using the proceeds
thereof were not an exempt person.’’
(21) The heading of subsection (b) of section
150 of such Code is amended by striking ‘‘TAX-EX-
EMPT PRIVATE ACTIVITY BONDS’’ and inserting
‘‘CERTAIN TAX-EXEMPT BONDS’’.
(22) Paragraph (3) of section 150(b) of such
Code is amended—
(A) by inserting ‘‘owned by a 501(c)(3) or-
ganization’’ after ‘‘any facility’’ in subpara-
graph (A),
(B) by striking ‘‘any private activity bond
which, when issued, purported to be a tax-ex-
empt qualified 501(c)(3) bond’’ in subpara-
graph (A) and inserting ‘‘any bond which, when
issued, purported to be a tax-exempt bond, and
which would be a private activity bond if the
501(c)(3) organization using the proceeds
thereof were not an exempt person’’, and
(C) by striking the heading thereof and in-
serting ‘‘BONDS FOR EXEMPT PERSONS OTHER
THAN GOVERNMENTAL UNITS.—’’.
(23) Paragraph (5) of section 150(b) of such
Code is amended—
(A) by striking ‘‘private activity’’ in sub-
paragraph (A),
(B) by inserting ‘‘and which would be a
private activity bond if the 501(c)(3) organiza-
tion using the proceeds thereof were not an ex-
empt person’’ after ‘‘tax-exempt bond’’ in sub-
paragraph (A),
(C) by striking subparagraph (B) and in-
serting the following new subparagraph:
‘‘(B) such facility is required to be owned
by an exempt person, and’’, and
(D) by striking ‘‘GOVERNMENTAL
UNITS
OR
501(c)(3)
ORGANIZATIONS’’ in the heading
thereof and inserting ‘‘EXEMPT PERSONS’’.
(24) Section 150 of such Code is amended by
adding at the end thereof the following new sub-
section:
‘‘(f) CERTAIN RULES TO APPLY TO BONDS FOR EX-
EMPT PERSONS OTHER THAN GOVERNMENTAL UNITS.—
‘‘(1) IN GENERAL.—Nothing in section 103(a)
or any other provision of law shall be construed to
provide an exemption from Federal income tax for
interest on any bond which would be a private activ-
ity bond if the 501(c)(3) organization using the pro-
ceeds thereof were not an exempt person unless such
bond satisfies the requirements of subsections (b)
and (f) of section 147.
‘‘(2) SPECIAL RULE FOR POOLED FINANCING
OF 501(c)(3) ORGANIZATION.—
‘‘(A) IN GENERAL.—At the election of the
issuer, a bond described in paragraph (1) shall
be treated as meeting the requirements of sec-
tion 147(b) if such bond meets the require-
ments of subparagraph (B).
‘‘(B) REQUIREMENTS.—A bond meets the
requirements of this subparagraph if—
‘‘(i) 95 percent or more of the net
proceeds of the issue of which such bond is
a part are to be used to make or finance
loans to 2 or more 501(c)(3) organizations
or governmental units for acquisition of
property to be used by such organizations,
‘‘(ii) each loan described in clause (i)
satisfies the requirements of section 147(b)
(determined by treating each loan as a sep-
arate issue),
‘‘(iii) before such bond is issued, a de-
mand survey was conducted which shows a
demand for financing greater than an
amount equal to 120 percent of the
lendable proceeds of such issue, and
‘‘(iv) 95 percent or more of the net
proceeds of such issue are to be loaned to
501(c)(3) organizations or governmental
units within 1 year of issuance and, to the
extent there are any unspent proceeds
after such 1-year period, bonds issued as
part of such issue are to be redeemed as
soon as possible thereafter (and in no
event later than 18 months after issuance).
A bond shall not meet the requirements of this
subparagraph if the maturity date of any bond
issued as part of such issue is more than 30
years after the date on which the bond was is-
sued (or, in the case of a refunding or series of
refundings, the date on which the original bond
was issued).’’
(25) Section 1302 of the Tax Reform Act of
1986 is repealed.
(26) Subparagraph (C) of section 57(a)(5) of
such Code is amended by striking clause (ii) and re-
designating clauses (iii) and (iv) as clauses (ii) and
(iii), respectively.
(27) Paragraph (3) of section 103(b) of such
Code is amended by inserting ‘‘and section 150(f)’’
after ‘‘section 149’’.
(28) Paragraph (3) of section 265(b) of such
Code is amended—
(A) by striking clause (ii) of subparagraph
(B) and inserting the following:
‘‘(ii) CERTAIN BONDS NOT TREATED
AS PRIVATE ACTIVITY BONDS.—For pur-
poses of clause (i)(II), there shall not be
treated as a private activity bond any obli-
gation issued to refund (or which is part of
a series of obligations issued to refund) an
obligation issued before August 8, 1986,
which was not an industrial development
bond (as defined in section 103(b)(2) as in
effect on the day before the date of the en-
actment of the Tax Reform Act of 1986
(or a private loan bond (as defined in sec-
tion 103(o)(2)(A), as so in effect, but with-
out regard to any exemption from such
definition 
other 
than 
section
103(o)(2)(A)))).’’; and
(B) by striking ‘‘(other than a qualified
501(c)(3) bond, as defined in section 145)’’ in
subparagraph (C)(ii)(I).
(f) EFFECTIVE DATE; SPECIAL RULE.—
(1) EFFECTIVE DATE.—The amendments made
by this section shall apply to bonds issued after the
date of the enactment of this Act.
(2) SPECIAL RULE FOR CERTAIN BONDS ISSUED
AFTER DATE OF ENACTMENT.—
(A) IN GENERAL.—The amendments made
by this section shall not apply to any bond
which—
(i) is issued after the date of the en-
actment of this Act, and
(ii) is part of an issue which is subject
to any transitional rule under subtitle B of
title XIII of the Tax Reform Act of 1986.
(B) ELECTION OUT.—This paragraph shall
not apply to any issue with respect to which the
issuer elects not to have this paragraph apply.
(3) DELAYED EFFECTIVE DATE WITH RESPECT
TO SMALL ISSUER RULES.—For purposes of section
148(f)(4)(D) of the Internal Revenue Code of 1986,
the amendments made by this section shall apply to
bonds issued in calendar years beginning after the
date of the enactment of this Act.
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