I
106TH CONGRESS
1ST SESSION
H. R. 2756
To prevent governmental entities from using tax-exempt financing to engage
in unfair competition against private enterprise.
IN THE HOUSE OF REPRESENTATIVES
AUGUST 5, 1999
Mr. HALL of Texas introduced the following bill; which was referred to the
Committee on Ways and Means
A BILL
To prevent governmental entities from using tax-exempt fi-
nancing to engage in unfair competition against private
enterprise.
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 ‘‘Fair Competition in Tax-
Exempt Financing Act of 1999’’.
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SEC. 2. DENIAL OF TAX-EXEMPT FINANCING FOR CERTAIN
FACILITIES THAT USE TAX-EXEMPT FINANC-
ING TO COMPETE WITH EXISTING PRIVATE
SECTOR FACILITIES.
(a) IN GENERAL.—Section 141 of the Internal Rev-
enue Code of 1986 (defining private activity bond and
qualified bond) is amended by redesignating subsection (e)
as subsection (f) and by inserting after subsection (d) the
following new subsection:
‘‘(e) CERTAIN ISSUES USED FOR FACILITIES THAT
COMPETE WITH EXISTING PRIVATE SECTOR FACILI-
TIES.—
‘‘(1) IN GENERAL.—For purposes of this title,
the term ‘private activity bond’ includes any bond
that is issued as part of an issue if the amount of
the proceeds of the issue which are to be used (di-
rectly or indirectly) to finance the construction, re-
construction, rehabilitation or expansion of a dis-
qualified facility exceeds the lesser of—
‘‘(A) 5 percent of such proceeds, or
‘‘(B) $1,000,000.
‘‘(2) BOND
NOT
TREATED
AS
A
QUALIFIED
BOND.—For purposes of this title, any bond de-
scribed in paragraph (1) shall not be a qualified
bond.
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‘‘(3) DISQUALIFIED
FACILITY.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—The term ‘disqualified
facility’ means real property or related improve-
ments which are to be used (directly or indi-
rectly) by one or more nongovernmental persons
in connection with a trade or business con-
ducted by such person or persons (whether or
not such use constitutes ‘private business use’
within the meaning of subsection (b)(6)) if—
‘‘(i) on or before the date on which
the bonds are issued to finance the con-
struction, reconstruction, rehabilitation, or
expansion of such disqualified facility, a fa-
cility substantially similar in purpose or
use to the disqualified facility has been
placed in service by one or more non-
governmental persons within 5 miles of
such disqualified facility;
‘‘(ii) such other facility was not fi-
nanced with bonds the interest on which
was or is exempt under section 103; and
‘‘(iii) with respect to any calendar
year, the aggregate use of the disqualified
facility by one or more of the nongovern-
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mental persons who have used or do use
the facility referred to in clause (i) in con-
nection with a trade or business conducted
by such person or persons exceeds 10 per-
cent of the days on which the disqualified
facility practically and ordinarily would be
used (by on custom and usage in the in-
dustry) by all persons.
‘‘(B) The term ‘disqualified facility’ shall
not include any facility that constitutes an inte-
gral part of a school, a hospital or similar facil-
ity the principal purpose of which is to provide
on a regular basis educational instruction, in
accordance with an established curriculum, or
medical care.
‘‘(C) TRADE OR BUSINESS.—For purposes
of subparagraph (A), the term ‘trade or busi-
ness’ includes the sponsorship of trade shows
and similar exhibitions and the leasing of space
to exhibitors, without regard to whether the
sponsor is organized as a not-for-profit organi-
zation, but only if one or more of the exhibitors
are engaged in the active conduct of a trade or
business for profit.
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‘‘(4) QUALIFIED
REHABILITATIONS.—A bond
shall not be treated as a bond described in para-
graph (1) if it is issued as part of an issue substan-
tially all of the proceeds of which are used for the
reconstruction or rehabilitation of a facility, but only
if such facility is not materially expanded as the re-
sult of such rehabilitation.
‘‘(5) ANTI-ABUSE
REGULATIONS.—The Sec-
retary shall prescribe such regulations as may be ap-
propriate to carry out the purposes of this sub-
section, including such regulations as may be appro-
priate to prevent avoidance of such purposes through
multiple bond issues, related persons, use of related
facilities or multiuse complexes or otherwise.’’
(b) EFFECTIVE DATE.—
(1) IN GENERAL.—Except as provided in this
subsection (b), the amendments made by this section
shall apply to bonds issued on or after August 2,
1999.
(2) EXCEPTION FOR CONSTRUCTION AND CER-
TAIN BINDING AGREEMENTS.—
(A) The amendments made by this section
shall not apply to bonds the proceeds of which
are used for the construction, reconstruction,
rehabilitation or expansion of a facility—
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(i) if such construction, reconstruc-
tion, rehabilitation or expansion has phys-
ically commenced in a material fashion
(other than site testing, site preparation or
similar activities) before August 2, 1999,
and has resulted in significant expendi-
tures before such date, and was completed
on or after such date, or
(ii) if a State or political subdivision
thereof has entered into a binding contract
before August 2, 1999, that requires the
incurrence of significant expenditures for
such construction, reconstruction, rehabili-
tation or expansion (other than expendi-
tures related to the issuance of bonds or to
architectural or engineering plans), and
some or all of such expenditures are in-
curred on or after such date.
(B) For purposes of subparagraph (A), the
term ‘‘significant expenditures’’ means expendi-
tures equal to or exceeding 10 percent of the
reasonably anticipated cost of the construction,
reconstruction, rehabilitation.’’
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