4.6.1.1 De Minimis Private Business Use Exceptions

Short term arrangements for the use of bond financed property by a non governmental user will not be considered private business use if the following requirements are satisfied:

100 Day Arrangements. (1) The term of use under the arrangement (including all renewal options) is no longer than 100 days; (2) the arrangements would be treated as general public use, except that it is not available for use on the same basis by natural persons not engaged in a trade or business because generally applicable, uniformly applied rates are generally not available to those persons; and (3) the property is not financed for the principal purpose of providing that property for use by that non governmental person. This exception is available for facilities that are not available for general public use, such as short term housing of federal prisoners in a bond financed facility.
50 Day Arrangements. (1) The term of use under the arrangement (including all renewal options) is no longer than 50 days; (2) the arrangement is a negotiated arm’s length transaction, with fair market value compensation; and (3) the property is not financed for the principal purpose of providing that property for use by that nongovernmental person. This exception allows for negotiation of specific arrangements for short term use.

Certain other types of use of bond proceeds or bond financed property will not be considered private business use or will be disregarded, including the following:

Use by Agents. Use of proceeds by non governmental persons solely in their capacity as agents of a governmental person
Use Incidental to Financing Arrangements. Use by a nongovernmental person that is solely incidental to a financing transaction or arrangement (e.g., bond trustees, loan services)
Temporary Use by Developers. Temporary use during initial development by a developer of an improvement that carries out an essential governmental function, if (1) the issuer and the developer reasonably expect on the issue date to proceed with all reasonable speed to develop the improvement and the benefited property, and to transfer the improvement to a governmental person; and (2) the improvement is in fact transferred promptly after the benefitted property is developed
Incidental Use. Incidental use (e.g., pay telephones, vending machines, advertising displays, use for television cameras) up to 2.5% of the proceeds of a bond issue used to finance the facility will be disregarded if (1) except for vending machines, pay telephones, kiosks and similar uses, the use does not involve the transfer of possession and control of spaces that is separated from other areas of the facility by walls, partitions or other physical barriers; (2) the non possessory use is not functionally related to any other use of the facility by the same nongovernmental person (other than a different non possessory use); and (3) all non possessory uses of the facility do not, in the aggregate, involve the use of more than 2.5% of the facility
Qualified Improvements. This exception applies to proceeds used for improvements of existing governmentally owned buildings where the building already has some private business use. Proceeds used for improvements of governmentally owned buildings (including land functionally related and subordinate to the building) will not be treated as having private business use if (1) the building was placed in service more than 1 year before the construction or acquisition of the improvement is begun, (2) the improvement is not exclusively for any private business use, (3) no portion of the improved building or any payments in respect of the improved building are taken into account under the private security test, and (4) no more than 15% of the improved building is used for a private business use. For example, this exception would apply to proceeds spent on seismic improvements to existing governmental buildings, where the buildings might have some amount (less than 15%) of current private business use.