SERVICE WILL NOT RULE ON SECTION 141 'PRIVATE BUSINESS USE TEST' AND 'PRIVATE SECURITY OR PAYMENT TEST.'

Rev. Proc. 88-57

SECTION 1. PURPOSE

This revenue procedure states that the Internal Revenue Service will not ordinarily issue rulings or determination letters regarding whether bonds to finance output facilities meet the "private business use test" and the "private security or payment test" described in section 141(b)(1) and (2) of the Internal Revenue Code. In addition, this procedure modifies the description of this no-rule area to take into account changes effected by the Tax Reform Act of 1986, 1986-3 (Vol. 1) C.B. 519.

SEC. 2. BACKGROUND

Section 4 of Rev. Proc. 88-3 is entitled "AREAS IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT ORDINARILY BE ISSUED." Section 5 of Rev. Proc. 88-3 is entitled "AREA[S] UNDER EXTENSIVE STUDY IN WHICH RULINGS OR DETERMINATION LETTERS WILL NOT BE ISSUED UNTIL THE SERVICE RESOLVES THE ISSUE THROUGH PUBLICATION OF A REVENUE RULING, REVENUE PROCEDURE, REGULATIONS OR OTHERWISE." Subsection .05 of section 5 does not yet reflect the changes resulting from enactment of the Tax Reform Act of 1986.

SEC. 3. PROCEDURE

Rev. Proc. 88-3 is modified by deleting subsection .05 of section 5 and including under section 4.01 the following updated version of that subsection:

Section 141. -- Private Activity Bond; Qualified Bond. -- With respect to requests made pursuant to Rev. Proc. 88-33, 1988-25 I.R.B. 48, whether state or local bonds will meet the "private business use test" and the "private security or payment test" under section 141(b)(1) and (2) of the Internal Revenue Code in situations where the proceeds are used to finance certain output facilities and, pursuant to a contract to take, or take or pay for, a nongovernmental person purchases 30 percent or more of the actual output of the facility but 10 percent or less of the subparagraph (5) output of the facility as defined in section 1.103-7(b)(5)(ii)(b) of the regulations (issued under former section 103(b) of the Code). In similar situations, the Service will not ordinarily issue rulings or determination letters concerning questions arising under paragraphs (3), (4), and (5) of section 141(b).

SEC. 4. EFFECTIVE DATE

This revenue procedure is effective December 27, 1988, the date of its publication in the Internal Revenue Bulletin.

SEC. 5. EFFECT ON OTHER REVENUE PROCEDURES

Rev. Proc. 88-3 is modified.

DRAFTING INFORMATION

The principal author of this revenue procedure is Gene Overton of the Office of Assistant Chief Counsel (Financial Institutions & Products). For further information regarding this revenue procedure contact Mr. Overton on (202) 566-4310 (not a toll-free call).