treated as pursuant to the 1st tax-exempt fi-
nancing of the property.
‘‘(C) DEFINITIONS.—For purposes of this
paragraph—
‘‘(i) TAX-EXEMPT
FINANCING.—The
term ‘tax-exempt financing’ means financ-
ing provided by tax-exempt bonds.
‘‘(ii) 
TAXABLE
FINANCING.—The
term ‘taxable financing’ means financing
which is not tax-exempt financing.’’
(7) Section 141(f) of such Code, as redesig-
nated by paragraph (6), is amended—
(A) by adding ‘‘or’’ at the end of subpara-
graph (E),
(B) by striking ‘‘, or’’ at the end of sub-
paragraph (F), and inserting in lieu thereof a
period, and
(C) by striking subparagraph (G).
(8) The last sentence of section 144(b)(1) of
such Code is amended by striking ‘‘(determined’’
and all that follows to the period.
(9) Clause (ii) of section 144(c)(2)(C) of such
Code is amended by striking ‘‘a governmental unit’’
and inserting ‘‘an exempt person’’.
(10) Section 146(g) of such Code is amended—
(A) by striking paragraph (2), and
(B) by redesignating the remaining para-
graphs after paragraph (1) as paragraphs (2)
and (3), respectively.
(11) The heading of section 146(k)(3) of such
Code is amended by striking ‘‘GOVERNMENTAL’’ and
inserting ‘‘EXEMPT PERSON’’.
(12) The heading of section 146(m) of such
Code is amended by striking ‘‘GOVERNMENT’’ and
inserting ‘‘EXEMPT PERSON’’.
(13) Subsection (h) of section 147 of such Code
is amended to read as follows:
‘‘(h) CERTAIN RULES NOT TO APPLY TO MORTGAGE
REVENUE
BONDS
AND
QUALIFIED
STUDENT
LOAN
BONDS.—Subsections (a), (b), (c), and (d) shall not apply
to any qualified mortgage bond, qualified veterans’ mort-
gage bond, or qualified student loan bond.’’
(14) Section 147 of such Code is amended by
striking paragraph (4) of subsection (b) and redesig-
nating paragraph (5) of such subsection as para-
graph (4).
(15) Subparagraph (F) of section 148(d)(3) of
such Code is amended—
(A) by striking ‘‘or which is a qualified
501(c)(3) bond’’, and
(B) by striking ‘‘GOVERNMENTAL
USE
BONDS AND QUALIFIED 501(c)(3)’’ in the heading
thereof and inserting ‘‘EXEMPT PERSON’’.
(16) Subclause (II) of section 148(f)(4)(B)(ii)
of such Code is amended by striking ‘‘(other than a
qualified 501(c)(3) bond)’’.
(17) Clause (iv) of section 148(f)(4)(C) of such
Code is amended—
(A) by striking ‘‘a governmental unit or a
501(c)(3) organization’’ each place it appears
and inserting ‘‘an exempt person’’,
(B) 
by 
striking 
‘‘qualified 
501(c)(3)
bonds,’’, and
(C) by striking the comma after ‘‘private
activity bonds’’ the first place it appears.
(18) Subparagraph (A) of section 148(f)(7) of
such Code is amended by striking ‘‘(other than a
qualified 501(c)(3) bond)’’.
(19) Paragraph (2) of section 149(d) of such
Code is amended—
(A) by striking ‘‘(other than a qualified
501(c)(3) bond)’’, and
(B) by striking ‘‘CERTAIN PRIVATE’’ in the
heading thereof and inserting ‘‘PRIVATE’’.
(20) Section 149(e)(2) of such Code is amend-
ed—
(A) by striking ‘‘which is not a private ac-
tivity bond’’ in the second sentence and insert-
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 the following new
sentence: ‘‘Subparagraph (D) shall not apply to
any bond which is not a private activity 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 the following new subsection:
‘‘(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).
(d) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section
shall apply to bonds issued after the date of the en-
actment of this Act.
(2) EXCEPTION.—The amendments made by
this section shall not apply to bonds issued before
January 1, 1997, for purposes of applying section
148(f)(4)(D) of the Internal Revenue Code of 1986.
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