4.6.1.2 Measurement of Private Business Use

The Regulations provide a complex method for measuring the amount of private business use of a bond financed project. In general, however, the amount of private business use is based on the average amount of private business use during each 1 year period, averaged over the period beginning on the earlier of the bond issue date or the date the project was placed in service and ending on the earlier of the bond maturity date or the end of the expected economic life of the project. The maturity date of the bonds is subject to adjustment if either the issuer expects to refund the bonds with longer term bonds or the issuer expects to redeem the bonds before their scheduled maturity date.

If private business use is reasonably expected to have a greater fair market value than the government use, the average amount of private business use must be determined according to the relative (according to the facts and circumstances) reasonably expected fair market values of use rather than another measure, such as average time of use. The amount of private business use of common areas within a bond financed facility is based on a reasonable method that properly reflects the proportionate benefit to be derived by the users of the facility, and neutral costs paid with bond proceeds (costs of issuance, investments in reserve or replacement fund, qualified guarantee, or qualified hedge fees), are allocated according to this method among the other purposes for which bond proceeds are used.