Source: https://www.law.cornell.edu/uscode/text/26/470?quicktabs_8=1
Timestamp: 2015-04-01 21:20:20
Document Index: 104042335

Matched Legal Cases: ['§ 470', '§ 470', '§ 470', '§ 848', '§ 7', '§ 7', '§ 7', '§ 849', '§ 403', '§ 847']

26 U.S. Code § 470 - Limitation on deductions allocable to property used by governments or other tax-exempt entities | LII / Legal Information Institute
U.S. Code › Title 26 › Subtitle A › Chapter 1 › Subchapter E › Part II › Subpart C › § 470 26 U.S. Code § 470 - Limitation on deductions allocable to property used by governments or other tax-exempt entities
Limitation on losses Except as otherwise provided in this section, a tax-exempt use loss for any taxable year shall not be allowed.
Disallowed loss carried to next year Any tax-exempt use loss with respect to any tax-exempt use property which is disallowed under subsection (a) for any taxable year shall be treated as a deduction with respect to such property in the next taxable year.
Tax-exempt use loss The term “tax-exempt use loss” means, with respect to any taxable year, the amount (if any) by which—
Tax-exempt use property (A)
In general The term “tax-exempt use property” has the meaning given to such term by section 168
(h), except that such section shall be applied—
as if section 197 intangible property (as defined in section 197), and property described in paragraph (1)(B) or (2) of section 167
(f), were tangible property.
Exception for partnerships Such term shall not include any property which would (but for this subparagraph) be tax-exempt use property solely by reason of section 168
Cross reference For treatment of partnerships as leases to which section 168
(h) applies, see section 7701
Exception for certain leases This section shall not apply to any lease of property which meets the requirements of all of the following paragraphs:
Availability of funds (A)
In general A lease of property meets the requirements of this paragraph if (at all times during the lease term) not more than an allowable amount of funds are—
to or for the benefit of the lessor or any lender, or to or for the benefit of the lessee to satisfy the lessee’s obligations or options under the lease. For purposes of clause (ii), funds shall be treated as set aside or expected to be set aside only if a reasonable person would conclude, based on the facts and circumstances, that such funds are set aside or expected to be set aside.
Arrangements The arrangements referred to in this subparagraph include a defeasance arrangement, a loan by the lessee to the lessor or any lender, a deposit arrangement, a letter of credit collateralized with cash or cash equivalents, a payment undertaking agreement, prepaid rent (within the meaning of the regulations under section 467), a sinking fund arrangement, a guaranteed investment contract, financial guaranty insurance, and any similar arrangement (whether or not such arrangement provides credit support).
Allowable amount (i)
Except as otherwise provided in this subparagraph, the term “allowable amount” means an amount equal to 20 percent of the lessor’s adjusted basis in the property at the time the lease is entered into.
Higher amount permitted in certain cases
No allowable amount for certain arrangements
Lessor must make substantial equity investment (A)
In general A lease of property meets the requirements of this paragraph if—
has at the time the lease is entered into an unconditional at-risk equity investment (as determined by the Secretary) in the property of at least 20 percent of the lessor’s adjusted basis in the property as of that time, and
Risk of loss For purposes of clause (ii),
the fair market value at the end of the lease term shall be reduced to the extent that a person other than the lessor bears a risk of loss in the value of the property.
Paragraph not to apply to short-term leases This paragraph shall not apply to any lease with a lease term of 5 years or less.
Lessee may not bear more than minimal risk of loss (A)
In general A lease of property meets the requirements of this paragraph if there is no arrangement under which the lessee bears—
Exception The Secretary may by regulations provide that the requirements of this paragraph are not met where the lessee bears more than a minimal risk of loss.
Property with more than 7-year class life In the case of a lease—
under which the lessee has the option to purchase the property,
Treatment of former tax-exempt use property (A)
In general In the case of any former tax-exempt use property—
Former tax-exempt use property For purposes of this subsection, the term “former tax-exempt use property” means any property which—
Disposition of entire interest in property If during the taxable year a taxpayer disposes of the taxpayer’s entire interest in tax-exempt use property (or former tax-exempt use property), rules similar to the rules of section 469
(g) shall apply for purposes of this section.
Coordination with section 469 This section shall be applied before the application of section 469.
Coordination with sections 1031 and 1033 (A)
In general Sections 1031
(a) and 1033
(a) shall not apply if—
Adjusted basis In the case of property acquired by the lessor in a transaction to which section 1031 or 1033 applies, the adjusted basis of such property for purposes of this section shall be equal to the lesser of—
the amount which would be the lessor’s adjusted basis if such sections did not apply to such transaction.
Related parties The terms “lessor”, “lessee”, and “lender” each include any related party (within the meaning of section 197
(f)(9)(C)(i)).
Lease term The term “lease term” has the meaning given to such term by section 168
(i)(3).
Lender The term “lender” means, with respect to any lease, a person that makes a loan to the lessor which is secured (or economically similar to being secured) by the lease or the leased property.
Loan The term “loan” includes any similar arrangement.
Regulations The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations which—
So in original. Probably should be “subparagraph (A)(ii)”.
(Added Pub. L. 108–357, title VIII, § 848(a),Oct. 22, 2004, 118 Stat. 1602; amended Pub. L. 110–172, § 7(c),Dec. 29, 2007, 121 Stat. 2482.)
2007—Subsec. (c)(2). Pub. L. 110–172, § 7(c)(1), reenacted heading without change and amended text generally. Prior to amendment, text read as follows: “The term ‘tax-exempt use property’ has the meaning given to such term by section 168
“(B) as if property described in—
“(i) section 167
(f)(1)(B),
“(ii) section 167
“(iii) section 197 intangible,
Such term shall not include property which would (but for this sentence) be tax-exempt use property solely by reason of section 168
(h)(6) if any credit is allowable under section 42 or 47 with respect to such property.”
Subsec. (d)(1)(A). Pub. L. 110–172, § 7(c)(2), in introductory provisions, substituted “(at all times during the lease term)” for “(at any time during the lease term)”.
Pub. L. 108–357, title VIII, § 849,Oct. 22, 2004, 118 Stat. 1606, as amended by Pub. L. 109–135, title IV, § 403(ff),Dec. 21, 2005, 119 Stat. 2631, provided that:
“(a) In General.—Except as provided in this section, the amendments made by this part [part III (§§ 847–849) of subtitle B of title VIII of Pub. L. 108–357, enacting this section and amending sections 167, 168, and 197 of this title] shall apply to leases entered into after March 12, 2004, and in the case of property treated as tax-exempt use property other than by reason of a lease, to property acquired after March 12, 2004.
“(1) In general.—The amendments made by this part shall not apply to qualified transportation property.
“(2) Qualified transportation property.—For purposes of paragraph (1), the term ‘qualified transportation property’ means domestic property subject to a lease with respect to which a formal application—
“(3) Exchanges and conversion of tax-exempt use property.—Section 470(e)(4) of the Internal Revenue Code of 1986, as added by section 848, shall apply to property exchanged or converted after the date of the enactment of this Act [Oct. 22, 2004].
“(4) Intangibles and indian tribal governments.—The amendments made subsections (b)(2), (b)(3), and (e) ofsection 847 [amending sections 167, 168, and 197 of this title], and the treatment of property described in clauses (ii) and (iii) of section 470(c)(2)(B) of the Internal Revenue Code of 1986 (as added by section 848) as tangible property, shall apply to leases entered into after October 3, 2004.”