D.C. Mun. Regs. tit. 10, r. 10-B5007

Current through Register Vol. 71, No. 36, September 6, 2024

Rule 10-B5007 - EXEMPT SMALL ISSUE FACILITIES

5007.1

For purposes of § 5006.13, in determining the aggregate authorized face amount of any issue there shall be taken into account the face amount of bonds issued under all prior issues and which are outstanding at the time of the later issue (not including as outstanding any bond which is to be redeemed from the proceeds of the later issue), if all of the following apply:

(a) The proceeds of two (2) or more issues of bonds are to be used primarily with respect to facilities located at the same facility site;

(b) The principal user of those facilities is or will be the same person or two (2) or more related persons; and

(c) But for this subsection, § 5006.13 would apply to each issue.

5007.2

In determining the aggregate authorized face amount of an industrial development bond described in § 5006.13, there shall be taken into account not only the amount described in § 5007.1, but also the aggregate amount of capital expenditures paid or incurred with respect to facilities described in § 5007.3 during the six (6) year period beginning three (3) years before the date of the issue and ending three (3) years after that date (and financed otherwise than out of the proceeds of prior outstanding issues to which § 5006.13 applied), as if the aggregate amount of those capital expenditures constituted the face amount of a prior outstanding issue described in § 5007.1.

5007.3

For purposes of §§ 5007.1 and 5007.2, the facilities to be taken into account shall be those facilities which are located at the same facility site and the principal user of which is or will be the same person or two (2) or more related persons.

5007.4

The determination whether facilities are located at the same facility site under § 5007.3 shall be made as of the date of issue of the issue in question.

5007.5

In determining the aggregate authorized face amount of an industrial development bond described in § 5006.13, the provisions of § 5007.2 shall not apply to any industrial development bond issued as part of an issue the aggregate authorized face amount of which is one million dollars ($1,000,000) or less without regard to the provisions of § 5007.2.

5007.6

For purposes of § 5007.2, capital expenditures shall not include any capital expenditure which is an "excluded expenditure."

5007.7

A capital expenditure shall be an "excluded expenditure" under § 5007.6 if it satisfies any of the following criteria:

(a) It is made by a public utility company which is not a principal user (or related person) of the facility financed by the proceeds of the issue in question with respect to property of that company, or it is made by a governmental unit with respect to property of that governmental unit; and if in either instance the property of the company or unit (as the case may be) will be:

(1) Used to provide gas, water, sewage disposal services, electric energy, or telephone service;

(2) Installed in, or connected to, the facility, but will not consist of property which is such an integral part of the facility that the cost of the property is ordinarily included as part of the acquisition cost of the facility; and

(3) Of a type normally paid for by the user (or related person) in the form of periodic fees based upon time or use.

(b) It is made by a person other than the user, a related person, or a governmental unit and if it is made with respect to tangible personal property or intangible personal property leased to the user (or a related person) of a facility. This paragraph shall apply, however, only if the personal property is leased by the manufacturer of the tangible or intangible personal property, or by a person in the trade or business of leasing property the same as, or similar to, the personal property, and only if, pursuant to general business practice, property of that type is ordinarily the subject of a lease;

(c) It is made to replace property damaged or destroyed by fire, storm, or other casualty, to the extent that these expenditures do not exceed in dollar amount the fair market value (determined immediately before the casualty) of the property replaced;

(d) It is required by a change made after the date of issue in a federal or District law of general application or rules and regulations of general application issued under a federal or District law;

(e) It is required by or arises out of circumstances which could not reasonably be foreseen on the date of issue or arises out of a mistake of law or fact. The aggregate dollar amount taken into account under this paragraph with respect to any issue may not, however, exceed one million dollars ($1,000,000);

(f) It is described in clause (i) or (ii) of § 44 F(b)(2)(A) of the Internal Revenue Code for which a deduction was allowed under § 174(a) of the Internal Revenue Code; or

(g) It is excluded under the provisions of § 1.103 -10(b)(2)(v) of the Internal Revenue Regulations.

5007.8

An industrial development bond issued as part of an issue the aggregate authorized face amount of which is ten million dollars ($10,000,000) or less (but more than one million dollars ($1,000,000)) and substantially all of the proceeds of which are to be used to redeem part or all of a prior issue shall not constitute a qualified industrial development bond unless all of the prior issues being redeemed are qualified industrial development bonds under § 5007.2. In applying § 5007.2 with respect to the refunding issue, capital expenditures shall be taken into account only for purposes of determining whether the prior industrial development bond(s) being redeemed qualified (and would have continued to qualify) under § 5006.13 but for the redemption.

5007.9

Capital expenditures in an amount not to exceed ten million dollars ($10,000,000) shall not be taken into account for purposes of applying § 5007.2 in the case of any industrial development bond substantially all of the proceeds of which are to be used to provide an exempt small issue facility, and either of the following:

(a) With respect to which an Urban Development Action Grant has been made under § 119 of the Housing and Community Development Act of 1974; or

(b) With respect to which a portion of the cost has been or will be provided by any department, agency, or instrumentality of the United States or the District.

5007.10

Separate qualified industrial development bonds which (but for this subsection) would be treated under the provisions of proposed Internal Revenue Regulation § 1.103 -7(b)(6) and proposed Internal Revenue Regulation § 1.103 -7(c). Examples (16), (17), and (18) as part of the same issue shall be treated as separate issues unless the proceeds of those bonds will be used with respect to two (2) or more facilities at least one (1) of which is an eligible facility described in § 5002, and at least one (1) of which is located in a governmental unit other than the District or which have, or will have, as a principal user the same person or related persons.

5007.11

For purposes of § 5007.10, a person (other than a governmental unit) shall be considered a principal user of a facility if that person (or a group of related persons which includes that person) does one (1) of the following:

(a) Guarantees, arranges, participates in, or assists with the issuance (or pays any portion of the cost of issuance) of any obligation the proceeds of which are to be used to finance or refinance the facility; and

(b) Provides any property or any franchise, trademark or trade name (within the meaning of § 1253 of the Internal Revenue Code) which is to be used in connection with the facility.

5007.12

Each bond act proposed by the Executive Branch shall provide that in order for an industrial development bond to constitute a qualified industrial development bond, written statements signed by a responsible party of the facility applicant (e.g., the president or chief financial officer of a corporation or general partner of a partnership or limited partnership) shall be filed on the date of issuance of the bond with OBED and with the holder(s) of the bond(s) or, if applicable, the trustee for the holder(s) of the bond(s) (to be specified in the bond documents) setting forth the following information:

(a) The date and aggregate authorized face amount of the issue;

(b) The name and address of the facility applicant, the owner of the facility, and each principal user of the facility;

(c) The date and outstanding principal amount of any issue described in § 5007.1;

(d) The date and amount of any capital expenditures described in § 5007.2 paid or incurred within the three-year period preceding the date of issue of the industrial development bond;

(e) To the extent known at the time that the statement is filed, a description of each leasehold interest in the facility for which there is a lease agreement, or a binding commitment to enter into a lease, which shall include the term of the lease, renewal options if any, rental, and the percentage of the fair rental value of the entire facility attributable to each lease or prospective lease; and

(f) To the extent known at the time the statement is filed, a description of any use of the facility made by other users.

5007.13

Each bond act proposed by the Executive Branch shall provide that each principal user of an exempt small issue facility shall, within ninety (90) days after the first, second, and third anniversaries of the date of issuance of the bond, file with OBED and with the holder(s) of the bond(s) or, if applicable, the trustee for the holder(s) of the bond(s) (to be specified in the bond documents) a written statement setting forth by date and amount any capital expenditures (as described in § 5007.2) for the immediately preceding year.

5007.14

The Executive Branch may require independent verification of capital expenditures by a certified public accountant or other person acceptable to the Executive Branch.

5007.15

Certification required under § 5015 shall also be submitted as to the principal users of the facility.

D.C. Mun. Regs. tit. 10, r. 10-B5007

Final Rulemaking published at 30 DCR 4905, 4919 (September 23, 1983)