Tax-Exempt Debt

Tax-Exempt Debt

The Tax Compliance Officer works with several departments on campus that has oversight of the various aspects of tax-exempt debt. As needed, the Tax Compliance Officer will perform reviews of Private Business Use relating to tax-exempt debt issuances.

Private Business Use is the use (directly or indirectly) of facilities financed by tax-exempt bonds in a trade or business carried on by a nonqualified user. A qualified user is a state or local governmental unit described in Section 501(c)(3) of the Internal Revenue Code using the facilities in accordance with its tax-exempt purpose.

Excessive private business use of the proceeds of facilities financed with tax-exempt bonds may cause the interest on the tax-exempt bonds to be taxable to the bondholders.

Types of Activities That Generate Private Business Use

  1. Ownership,
  2. Actual or beneficial use pursuant to:
    • Leases,
    • Management or service contracts,
    • Research agreements,
    • Special legal entitlements,
    • Special economic benefit to a nonqualified user.

Exceptions To Private Business Use

  1. General public use,
  2. Temporary use,
  3. Incidental use; and
  4. Qualified improvements to existing property.