# Prop. Treas. Reg. § 1.145-1: Qualified 501(c)(3) bonds.

Proposed regulation, not in force. FI-72-88, 94-31430, published 1994-12-30 <https://www.federalregister.gov/documents/1994/12/30/94-31430/definition-of-private-activity-bonds>. Interprets 26 U.S.C. § 145.

141. In the case of a transaction entered into for a principal purpose of transferring to a nongovernmental person significant benefits of tax-exempt financing in a manner that is inconsistent with the purposes of section 141, the Commissioner may take any action to reflect the substance of the transaction. The proposed regulations provide several examples illustrating the application of the anti-abuse rule. O. Section 1.145-1 Qualified 501(c)(3) Bonds

Par. 5. Section 1.145-1 is added to read as follows:

(a) In general. In applying the requirements of section 145(a)(2), Secs. 1.141-1 through 1.141-16 apply to determine whether use of the proceeds of an issue (or private payments or security with respect thereto) by a person (other than a section 501(c)(3) organization using the proceeds in an activity that does not constitute an unrelated trade or business) gives rise to private business use, private security or payments, or private loans.

(b) Reasonable expectations and deliberate actions--(1) In general. Except as otherwise provided in this paragraph (b), an issue is an issue of qualified 501(c)(3) bonds if the issuer and the 501(c)(3) organization reasonably expect, as of the issue date, that the issue will meet the requirements applicable to those bonds under section 141(e) and section 145. An issue ceases to be an issue of qualified 501(c)(3) bonds if the issuer or 501(c)(3) organization takes a deliberate action, subsequent to the issue date, that causes the bonds to fail to comply with the applicable requirements under section 141(e) and 145 (for example, revocation of exempt status as a result of private inurement). For this purpose, deliberate actions are defined under Sec. 1.141-2. In lieu of this paragraph (b), Sec. 1.141-12 applies for purposes of section 145(d)(2)(B) (related to certain residential rental projects).

(2) Remedial actions. The remedial actions of Sec. 1.141-13 may be applied to prevent a deliberate action from causing an issue to cease to be treated as tax-exempt bonds under section 145.

(c) Effective dates. For effective dates of this section, see Sec. 1.141-16.