A bill to amend the Internal Revenue Code of 1986 to provide for the treatment of tax-exempt bond financing of certain electrical output facilities.

SECTION 1. TREATMENT OF TAX-EXEMPT BOND FINANCING OF CERTAIN ELECTRICAL 
              OUTPUT FACILITIES.

    (a) Certain Transactions Treated as Sales to General Public for 
Purposes of Private Business Tests.--Paragraph (8) of section 141(b) of 
the Internal Revenue Code of 1986 (defining nonqualified amount) is 
amended to read as follows:
            ``(8) Nonqualified amount.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `nonqualified amount' 
                means, with respect to an issue, the lesser of--
                            ``(i) the proceeds of such issue which are 
                        to be used for any private business use, or
                            ``(ii) the proceeds of such issue with 
                        respect to which there are payments (or 
                        property or borrowed money) described in 
                        paragraph (2).
                    ``(B) Use pursuant to certain transactions not 
                taken into account.--There shall not be taken into 
                account in determining a nonqualified amount with 
                respect to an issue 5 percent or more of the proceeds 
                of which are to be used with respect to any output 
                facility furnishing electric energy any of the 
                following transactions:
                            ``(i) The sale of output by such facility 
                        to another State or local government output 
                        facility for resale by such other facility if 
                        such other facility is not participating in an 
                        open access plan (as defined in subsection 
                        (f)(3)) and the output is to be used for 
                        government use.
                            ``(ii) Participation by such facility in an 
                        output exchange agreement with other output 
                        facilities if--
                                    ``(I) such facility is not a net 
                                seller of output under such agreement 
                                determined on not more than an annual 
                                basis,
                                    ``(II) such agreement does not 
                                involve output-type contracts, and
                                    ``(III) the purpose of the 
                                agreement is to enable the facilities 
                                to satisfy differing peak load demands 
                                or to accommodate temporary outages.
                            ``(iii) The sale of excess output by such 
                        facility pursuant to a single agreement of not 
                        more than 30 days duration, other than through 
                        an output contract with specific purchasers.
                            ``(iv) The sale of excess output by such 
                        facility not to exceed $1,000,000.''.
    (b) Election To Terminate Tax-Exempt Bond Financing by Certain 
Electrical Output Facilities.--Section 141 of the Internal Revenue Code 
of 1986 (relating to private activity bond; qualified bond) is amended 
by adding at the end the following:
    ``(f) Election To Terminate Tax-Exempt Bond Financing by Certain 
Electrical Output Facilities.--
            ``(1) In general.--In the case of an output facility for 
        the furnishing of electric energy financed with bonds which 
        would cease to be tax-exempt as the result of the participation 
        by such facility in an open access plan, such bonds shall not 
        cease to be tax-exempt bonds if the person engaged in such 
        furnishing by such facility makes an election described in 
        paragraph (2). Such election shall be irrevocable and binding 
        on any successor in interest to such person.
            ``(2) Election.--An election is described in this paragraph 
        if it is an election made in such manner as the Secretary 
        prescribes, and such person agrees that--
                    ``(A) such election is made with respect to all 
                output facilities for the furnishing of electric energy 
                by such person,
                    ``(B) no bond exempt from tax under section 103 may 
                be issued on or after the date of the participation by 
                such facilities in an open access plan with respect to 
                all such facilities of such person, and
                    ``(C) such outstanding bonds used to finance such 
                facilities for such person are redeemed not later than 
                6 months after--
                            ``(i) in the case of bonds issued before 
                        December 1, 1997, the later of--
                                    ``(I) the earliest date on which 
                                such bonds may be redeemed, or
                                    ``(II) the date of the election, 
                                and
                            ``(ii) in the case of bonds issued after 
                        November 30, 1997, and before the date of the 
                        participation by such facility in an open 
                        access plan, the earlier of--
                                    ``(I) the earliest date on which 
                                such bonds may be redeemed, or
                                    ``(II) the date which is 10 years 
                                after the date of the enactment of this 
                                subsection.
            ``(3) Open access plan.--For purposes of this subsection, 
        the term `open access plan' means--
                    ``(A) a plan by a State to allow more than 1 
                electric energy provider to offer such energy in a 
                State authorized competitive market, or
                    ``(B) a plan established or approved by an order 
                issued by the Federal Energy Regulatory Commission 
                which requires or allows transmission of electric 
                energy on behalf of another person.
            ``(4) Related persons.--For purposes of this subsection, 
        the term `person' includes a group of related persons (within 
        the meaning of section 144(a)(3)) which includes such 
        person.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to sales of output after November 8, 1997.

Summary: Amends the Internal Revenue code to set forth provisions concerning the treatment of tax-exempt bond financing of certain electrical output facilities.