Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/fed/irc20.asc

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Section 135.  Income from United States savings bonds used to pay
higher education tuition and fees

(a) General rule.  In the case of an individual who pays
qualified higher education expenses during the taxable year, no
amount shall be includible in gross income by reason of the
redemption during such year of any qualified United States
savings bond.

(b) Limitations.

    (1) Limitation where redemption proceeds exceed higher
education expenses.

    (A) In general.  If-

    (i) the aggregate proceeds of qualified United States
savings bonds redeemed by the taxpayer during the taxable year
exceed

    (ii) the qualified higher education expenses paid by the
taxpayer during such taxable year,

    the amount excludable from gross income under subsection (a)
shall not exceed the applicable fraction of the amount excludable
from gross income under subsection (a) without regard to this
subsection.

    (B) Applicable fraction.  For purposes of subparagraph (A),
the term "applicable fraction" means the fraction the numerator
of which is the amount described in subparagraph (A)(ii) and the
denominator of which is the amount described in subparagraph
(A)(i).

    (2) Limitation based on modified adjusted gross income.

    (A) In general.  If the modified adjusted gross income of
the taxpayer for the taxable year exceeds $40,000 ($60,000 in the
case of a joint return), the amount which would (but for this
paragraph) be excludable from gross income under subsection (a)
shall be reduced (but not below zero) by the amount which bears
the same ratio to the amount which would be so excludable as such
excess bears to $15,000 ($30,000 in the case of a joint return).

    (B) Inflation adjustment.  In the case of any taxable year
beginning in a calendar year after 1990, the $40,000 and $60,000
amounts contained in subparagraph (A) shall be increased by an
amount equal to-

    (i) such dollar amount, multiplied by

    (ii) the cost-of-living adjustment under section 1(f)(3) for
the calendar year in which the taxable year begins.

    (C) Rounding.  If any amount as adjusted under subparagraph

(B) is not a multiple of $50., such amount shall be rounded to
the nearest multiple of $50. (or if such amount is a multiple of
$25, such amount shall be rounded to the next highest multiple of
$50).

(c) Definitions.  For purposes of this section-

    (1) Qualified United States savings bond.  The term "quali
fied United States savings bond" means any United States savings
bond issued-

    (A) after December 31, 1989,

    (B) to an individual who has attained age 24 before the date
of issuance, and

    (C) at discount under section 3105 of title 31, United
States Code.

    (2) Qualified higher education expenses.

    (A) In general.  The term "qualified higher education
expenses" means tuition and fees required for the enrollment or
attendance of-

    (i) the taxpayer,

    (ii) the taxpayer's spouse, or

    (iii) any dependent of the taxpayer with respect to whom the
taxpayer is allowed a deduction under section 151,

    at an eligible educational institution.

    (B) Exception for education involving sports, etc.  Such
term shall not include expenses with respect to any course or
other education involving sports, games, or hobbies other than as
part of a degree program.

    (3) Eligible educational institution.  The term "eligible
educational institution" means-

    (A) an institution described in section 1201(a) or subpara
graph (C) or (D) of section 481(a)(1) of the Higher Education Act
of 1965 (as in effect on October 21, 1988), and

    (B) an area vocational education school (as defined in
subparagraph (C) or (D) of section 521(3) of the Carl D. Perkins
Vocational Education Act) which is in any State (as defined in
section 521(27) of such Act), as such sections are in effect on
October 21, 1988.

    (4) Modified adjusted gross income.  The term "modified
adjusted gross income" means the adjusted gross income of the
taxpayer for the taxable year determined-

    (A) without regard to this section and sections 911, 931,
and 933, and

    (B) after the application of sections 86, 469, and 219.

(d) Special rules.

    (1) Adjustment for certain scholarships and veterans bene
fits.  The amount of qualified higher education expenses
otherwise taken into account under subsection (a) with respect to
the education of an individual shall be reduced (before the
application of subsection (b)) by the sum of the amounts received
with respect to such individual for the taxable year as-

    (A) a qualified scholarship which under section 117 is not
includable in gross income,

    (B) an educational assistance allowance under chapter  30,
31, 32, 34, or 35 of title 38, United States Code, or

    (C) a payment (other than a gift, bequest, devise, or inher
itance within the meaning of section 102(a)) for educational
expenses, or attributable to attendance at an eligible
educational institution, which is exempt from income taxation by
any law of the United States.

    (2) No exclusion for married individuals filing separate
returns.  If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if the
taxpayer and his spouse file a joint return for the taxable year.

    (3) Regulations.  The Secretary may prescribe such
regulations as may be necessary or appropriate to carry out this
section, including regulations requiring record keeping and
information reporting.


Section 136.  Cross references to other acts

(a) For exemption of

    (1) Allowances and expenditures of meet losses sustained by
persons serving the United States abroad, due to appreciation of
foreign currencies, see section 5943 of Title 5, United States
Code.

    (2) Amounts credited to the Maritime Administration under
section 9(b)(6) of the Merchant Ship sales Act of 1946, see
section 9(c)(1) of that Act (50 USC App. 1742).

    (3) Benefits under laws administered by the Veteran's
Administration, see section 3101 of title 38, United States Code.

    (4) Earnings of slip contractors deposited in special re
serve funds, see section 607(d) of the Merchant Marine Act, 1936
(46 USC 1177).

    (5) Income derived from Federal Reserve banks, including
capital stock and surplus, see section 7 of the Federal Reserve
Act (12 USC 531).

    (6) Special pensions of persons on Army and Navy medal of
honor roll, see 38 USC 562(a)-(c).

(b) For extension of military income-tax-exemption benefits to
commissioned officers of Public Health Service in certain circum
stances, see section 212 of the Public Health Service Act (42 USC
213).


Section 141.  Private activity bond; qualified bond

(a) Private activity bond.  For purposes of this title, the term
"private activity bond" means any bond issued as part of an
issue-

    (1) which meets-

    (A) the private business use test of paragraph (1) of
subsection (b), and

    (B) the private security or payment test of paragraph (2) of
subsection (b), or

    (2) which meets the private loan financing test of
subsection (c).

(b) Private business tests.

    (1) Private business use test.  Except as otherwise provided
in the subsection, an issue meets the test of this paragraph if
more than 10 percent of the proceeds of the issue are to be used
for any private business use.

    (2) Private security or payment test.  Except as otherwise
provided in this subsection, an issue meets the test of this
paragraph if the payment of the principal of, or the interest on,
more than 10 percent of the proceeds of such issue is (under the
terms of such issue or any underlying arrangement) directly or
indirectly-

    (A) secured by any interest in-

    (i) property used or to be used for a private business use,
or

    (ii) payments in respect of such property, or

    (B) to be derived from payments (whether or not to the
issuer) in respect of property, or borrowed money, used or to be
used for a private business use.

    (3) 5 percent test for private business use not related or
disproportionate to government use financed by the issue.

    (A) In general.  An issue shall be treated as meeting the
tests of paragraphs (1) and (2) if such tests would be met if
such paragraphs were applied-

    (i) by substituting "5 percent" for "10 percent" each place
it appears, and

    (ii) by taking into account only-

    (I) the proceeds of the issue which are to be used for any
private business use which is not related to any government use
of such proceeds,

    (II) the disproportionate related business use proceeds of
the issue, and

    (III) payments, property, and borrowed money with respect to
any use of proceeds described in subclause (I) or (II).

    (B) Disproportionate related business use proceeds.  For
purposes of subparagraph (A), the disproportionate related
business use proceeds of an issue is an amount equal to the
aggregate of the excesses (determined under the following
sentence) for each private business use of the proceeds of an
issue which is related to a government use of such proceeds.  The
excess determined under this sentence is the excess of-

    (i) the proceeds of the issue which are to be used for the
private use, over

    (ii) the proceeds of the issue which are to be used for the
government use to which such private business use relates.

    (4) Lower limitation for certain output facilities.  An
issue 5 percent or more of the proceeds of which are to be used
with respect to any output facility (other than a facility for
the furnishing of water) shall be treated as meeting the tests of
paragraphs (1) and (2) if the nonqualified amount with respect to
such issue exceeds the excess of-

    (A) $15,000,000, over

    (B) the aggregate nonqualified amounts with respect to all
prior tax-exempt issues 5 percent or more of the proceeds of
which are or will be used with respect to such facility (or any
other facility which is part of the same project).

    There shall not be taken into account under subparagraph (B)
any bond which is not outstanding at the time of the later issue
or which is to be redeemed (other than in an advance refunding)
from the net proceeds of the later issue.

    (5) Coordination with volume cap where nonqualified amount
exceeds $15,000,000.  If the nonqualified amount with respect to
an issue-

    (A) exceeds $15,000,000, but

    (B) does not exceed the amount which would cause a bond &
which is part of such issue to be treated as a private activity
bond without regard to this paragraph.

    such bond shall nonetheless be treated as a private activity
bond unless the issuer allocates a portion of its volume cap
under section 146 to such issue in an amount equal to the excess
of such nonqualified amount over $15,000,000.

    (6) Private business use defined.

    (A) In general.  For purposes of this subsection, the term
"private business use" means use (directly or indirectly) in a
trade or business carried on by any person other than a
governmental unit.  For purposes of the preceding sentence, use
as a member of the general public shall not be taken into
account.

    (B) Clarification of trade or business.  For purposes of the
1st sentence of subparagraph (A), any activity carried on by a
person other than a natural person shall be treated as a trade or
business.

    (7) Government use.  The term "government use" means any use
other than a private business use.

    (8) Nonqualified amount.  For purposes of this subsection,
the term "non-qualified amount" means, with respect to an issue,
the lessor of-

    (A) the proceeds of such issue which are to be used for any
private business use, or

    (B) the proceeds of such issue with respect to which there
are payments (or property or borrowed money) described in
paragraph (2).

    (9) Exception for qualified 501(c)(3) bonds.  There shall
not be taken into account under this subsection or subsection (c)
the portion of the proceeds of an issue which (if issued as a
separate issue) would be treated as a qualified 501(c)(3) bond if
the issuer elects to treat such portion as a qualified 501(c)(3)
bond.

(c) Private loan financing test.

    (1) In general.  An issue meets the test of this subsection
if the amount of the proceeds of the issue which are to be used
(directly or indirectly) to make or finance loans (other than
loans described in paragraph (2)) to persons other than
governmental units exceeds the lessor of-

    (A) 5 percent of such proceeds, or

    (B) $5,000,000

    (2) Exception for tax assessment, etc., loans.  For purposes
of paragraph (1), a loan is described in this paragraph if such
loan-

    (A) enables the borrower to finance any governmental tax or
assessment of general application for a specific essential
governmental function, or

    (B) is a nonpurpose investment (within the meaning of
section 148(f)(6)(A)).

(d) Certain issues use to acquire nongovernmental output property
treated as private activity bonds.

    (1) In general.  For purposes of this title, the term
"private activity bond" includes any bond issued as part of an
issue if the amount of the proceeds of the issue which are to be
used (directly or indirectly) for the acquisition by a
governmental unit of nongovernmental output property exceeds the
lesser of-

    (A) 5 percent of such proceeds, or

    (B) $5,000,000.

    (2) Nongovernmental output property.  Except as otherwise
provided in this subsection, for purposes of paragraph (1), the
term "nongovernmental output property" means any property (or
interest therein) which before such acquisition was used (or held
for use) by a person other than a governmental unit in connection
with an output facility (within the meaning of subsection (b)(4)
(other than a facility for the furnishing of water).  For
purposes of the preceding sentence, use (or the holding for use)
before October 14, 1987, shall not be taken into account.

    (3) Exception for property acquired to provide output to
certain areas.  For purposes of paragraph (1)-

    (A) In general.  The term "nongovernmental output property"
shall not include any property which is to be used in connection
with an output facility 95 percent or more of the output of which
will be consumed in-

    (i) a qualified service area of the governmental unit
acquiring the property, or

    (ii) a qualified annexed area of such unit.

    (B) Definitions.  For purposes of subparagraph (A)-

    (i) Qualified service area.  The term "qualified service
are" means, with respect to the governmental unit acquiring the
property, any area throughout which such unit provided (at all
times during the 10-year period ending on the date such property
is acquired by such unit) output of the same type as the output
to be provided by such property.  For purposes of the preceding
sentence, the period before October 14, 1987, shall not be taken
into account.

    (ii) Qualified annexed area.  The term "qualified annexed
area" means, with respect to the governmental unit acquiring the
property, any are if-

    (I) such area is contiguous to, and annexed for general
governmental purposes into, a qualified service are of such unit,

    (II) output from such property is made available to all
members of the general public in the annexed area, and

    (III) the annexed area is not greater than 10 percent of
such qualified service area.

    (C) Limitation on size of annexed area not to apply where
output capacity does not increase by more than 10 percent.
Subclause (III) of subparagraph (B)(ii) shall not apply to an
annexation of an area by a governmental unit if the output
capacity of the property acquired in connection with the
annexation, when added to the output capacity of all other
property which is not treated as nongovernmental output property
by reason of subparagraph (A)(II) with respect to such annexed
area, does not exceed 10 percent of the output capacity of the
property providing output of the same type to the qualified
service area into which it is annexed.

    (D) Rules for determining relative size, etc.  For purposes
of subparagraphs (B)(ii) and (C)-

    (i) The size of any qualified service area and the output
capacity of property serving such area shall be determined as the
close of the calendar year preceding the calendar year in which
the acquisition of nongovernmental output property or the
annexation occurs.

    (ii) A qualified annexed area shall be treated as part of
the qualified service area into which it is annexed for purposes
of determining whether any other area annexed in a later year is
a qualified annexed area.

    (4) Exception for property converted to nonoutput use.  For
purposes of paragraph (1)-

    (A) In general.  The term "nongovernmental output property"
shall not include any property which is to be converted to a use
not in connection with an output facility.

    (B) Exception.  Subparagraph (A) shall not apply to any
property which is part of the output function of a nuclear power
facility.

    (5) Special rules.  In the case of a bond which is a private
activity bond solely by reason of this subsection-

    (A) subsections (c) and (d) of section 147 (relating to
limitations on acquisition of land and existing property) shall
not apply, and

    (B) paragraph (8) of section 142(a) shall be applied as if
it did not contain "local".

    (6) Treatment of joint action agencies.  With respect to
nongovernmental output property acquired by a joint action agency
the members of which are governmental units, this subsection
shall be applied at the member level by treating each member as
acquiring it s proportionate share of such property.

(e) Qualified bond.  For purposes of this part, the term
"qualified bond" means any private activity bond if-

    (1) In general.  Such bond is-

    (A) an exempt facility bond,

    (B) a qualified mortgage bond,

    (C) a qualified veterans' mortgage bond,

    (D) a qualified small issue bond,

    (E) a qualified student loan bond,

    (F) a qualified redevelopment bond, or

    (G) a qualified 501(c)(3) bond.

    (2) Volume cap.  Such bond is issued as part of an issue
which meets the applicable requirements of section 146, and1

    (3) Other requirements.  Such bond meets the applicable
requirements of each subsection of section 147.


Section 142.  Exempt facility bond

(a) General rule.  For purposes of this part, the term "exempt
facility bond" means any bond issued as part of an issue 95
percent or more of the net proceeds of which are to be used to
provide-

    (1) airports,

    (2) docks and wharves,

    (3) mass commuting facilities,

    (4) facilities for the furnishing of water,

    (5) sewage facilities,

    (6) solid waste disposal facilities,

    (7) qualified residential rental projects,

    (8) facilities for the local furnishing of electric energy
or gas,

    (9) local district heating or cooling facilities,

    (10) qualified hazardous waste facilities, or

    (11) high-speed intercity rail facilities.

(b) Special exempt facility bond rules.  For purposes of
subsection (a)-

    (1) Certain facilities must be governmentally owned.

    (A) In general.  A facility shall be treated as described in
paragraph (1), (2), and (3) of subsection (a) only if all of the
property to be financed by the net proceeds of the issue is to be
owned by a governmental unit.

    (B) Safe harbor for leases and management contracts.  For
purposes of subparagraph (A), property leased by a governmental
unit shall be treated as owned by such governmental unit if-

    (i) the lessee makes an irrevocable election (binding on the
lessee and all successors in interest under the lease) not to
claim depreciation or an investment credit with respect to such
property.

    (ii) the lease term (as defined in section 168 (i)(3)) is
not more than 80 percent of the reasonable expected economic life
of the property (as determined under section 147(b)), and

    (iii) the lessee has no option to purchase the property
other than at fair market value (as of the time such option is
exercised).

    Rules similar to the rules of the preceding sentence shall
apply to management contracts and similar types of operating
agreements.

    (2) Limitation on office space.  An office shall not be
treated as described in a paragraph of subsection (a) unless-

    (A) the office is located on the premises of a facility
described in such a paragraph, and

    (B) not more than a deminimis amount of the functions to be
performed at such office is not directly related to the day-to-
day operations at such facility.

(c) Airports, docks and wharves, mass commuting facilities and
high-speed intercity rail facilities.  For purposes of subsection
(a)-

    (1) Storage and training facilities.  Storage or training
facilities directly related to a facility described in paragraph
(1), (2), (3) or (11) of subsection (a) shall be treated as
described in the paragraph in which such facility is described.

    (2) Exception for certain private facilities.  Property
shall not be treated as described in paragraph (1), (2), (3) or
(11) of subsection (a) if such property is described in any of
the following subparagraphs and is to be used for any private
business use (as defined in section 141(b)(6)).

    (A) Any lodging facility.

    (B) Any retail facility (including food and beverage
facilities) in excess of a size necessary to serve passengers and
employees at the exempt facility.

    (C) Any retail facility (other than parking) for passengers
or the general public located outside the exempt facility
terminal.

    (D) Any office building for individuals who are not
employees of a governmental unit or of the operating authority
for the exempt facility.

    (E) Any industrial park or manufacturing facility.

(d) Qualified residential rental project.  For purposes of this
section-

    (1) In general.  The term "qualified residential rental
project" means any project for residential rental property if, at
all times during the qualified project period, such project meets
the requirements of subparagraph (A) or (B), whichever is elected
by the issuer at the time of the issuance of the issue with
respect to such project:

    (A) 20-50 test.  The project meets the requirements of this
subparagraph is 20 percent or more of the residential units in
such project are occupied by individuals whose income is 50
percent or less of area median gross income.

    (B) 40-60 test.  The project meets the requirements of this
subparagraph if 40 percent or more of the residential units in
such project are occupied by individuals whose income is 60
percent or less of area median gross income.

    For purposes of this paragraph, any property shall not be
treated as failing to be residential rental property merely
because part of the building in which such property is located is
used for purposes other than residential rental purposes.

    (2) Definitions and special rules.  For purposes of this
subsection-

    (A) Qualified project period.  The term "qualified project
period" means the period beginning on the 1st day on which 10
percent of the residential units in the project are occupied and
ending on the latest of-

    (i) the date which is 15 years after the date on which 50
percent of the residential units in the project are occupied.

    (ii) the 1st day on which no tax-exempt private activity
bond issued with respect to the project is outstanding, or

    (iii) the date on which any assistance provided with respect
to the project under section 8 of the United States Housing Act
of 1937 terminates.

    (B) Income of individuals; area median gross income.   The
income of individuals and area median gross income shall be
determined by the Secretary in a manner consistent with
determinations of lower income families and area median gross
income under section 8 of the United States Housing Act of 1937
(or, if such program is terminated, under such program as in
effect immediately before such termination).  Determinations
under the preceding sentence shall include adjustments for family
size.  Section 7872(g) shall no apply in determining the income
of individuals under the subparagraph.

    (3) Current income determinations.  For purposes of this
subsection-

    (A) In general.  The determination of whether the income of
a resident of a unit in a project exceeds the applicable income
limit shall be made at least annually on the basis of the current
income of the resident.

    (B) Continuing resident's income may increase above the
applicable limit.  If the income of a resident of a unit in a
project did not exceed the applicable income limit upon
commencement of such resident's occupancy of such unit (or as of
any prior determination under subparagraph (A)), the income of
such resident shall be treated as continuing to not exceed the
applicable income limit.  The preceding sentence shall cease to
apply to any resident whose income as of the most recent
determination under subparagraph (A) exceeds 140 percent of the
applicable income limit if after such determination, but before
the next determination, any residential unit of comparable or
smaller size in the same project is occupied by a new resident
whose income exceeds the applicable income limit.

    (4) Special rule in case of deep rent skewing.-

    (A) In general.  In the case of any project described in
subparagraph (B), the 2d sentence of subparagraph (B) of
paragraph (3) shall be applied by substituting-

    (i) "170 percent" for "140 percent", and

    (ii) "any low-income unit in the same project is occupied by
a new resident whose income exceeds 40 percent of area median
gross income" for "any residential unit of comparable or smaller
size in the same project is occupied by a new resident whose
income exceeds the applicable income limit".

    (B) Deep rent skewed project.  A project is described in
this subparagraph if the owner of the project elects to have this
paragraph apply and, at all times during the qualified project
period, such project meets the requirements of clauses (i), (ii),
and (iii):

    (i) The project meets the requirements of the clause if 15
percent or more of the low-income units in the project are
occupied by individuals whose income is 40 percent or less of
area median gross income.

    (ii) The project meets the requirements of this clause if
the gross rent with respect to each low-income unit in the
project does not exceed 30 percent of the applicable income limit
which applies to individuals occupying the unit.

    (iii) The project meets the requirements of this clause if
the gross rent with respect to each low-income unit in the
project does not exceed 1/2 of the average gross rent with
respect to units of comparable size which are not occupied by
individuals who meet the applicable income limit.

    (C) Definitions applicable to subparagraph (B).  For
purposes of subsection (B)-

    (i) Low-income unit.  The term "low-income unit" means any
unit which is required to be occupied by individuals who meet the
applicable income limit.

    (ii) Gross rent.  The term "gross rent" includes-

    (I) any payment under section 8 of the United States Housing
Act of 1937, and

    (II) any utility allowance determined by the Secretary after
taking into account such determinations under such section 8.

    (5) Applicable income limit.  for purposes of paragraphs (3)
and (4), the term "applicable income limit" means-

    (A) the limitation under subparagraph (A) or (B) of
paragraph (1) which applies to the project, or

    (B) in the case of a unit to which paragraph (4)(B)(i)
applies, the limitation which applies to such unit.

    (6) Special rule for certain high cost housing area.  In the
case of a project located in a city having 5 boroughs and a
population in excess of 5,000,000, subparagraph (B) of paragraph
(1) shall be applied by substituting "25 percent" for "40
percent".

    (7) Certification to secretary.  The operator of any project
with respect to which an election was made under this subsection
shall submit to the Secretary (at such time and in such manner as
the Secretary shall prescribe) an annual certification as to
whether such project continues to meet the requirements of this
subsection.  Any failure to comply with the provisions of the
preceding sentence shall not affect the tax-exempt status of any
bond but shall subject the operator to penalty, as provided in
section 6652(j).

(e) Facilities for the furnishing of water.  For purposes of
subsection (a)(4), the term "facilities for the furnishing of
water" means any facility for the furnishing of water if-

    (1) the water is or will be made available to members of the
general public (including electric utility, industrial,
agricultural, or commercial users), and

    (2) either the facility is operated by a governmental unit
or the rates for the furnishing or sale of the water have been
established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or
by a public service or public utility commission or other similar
body of any State of political subdivision thereof.

(f) Local furnishing of electric energy or gas.  For purposes of
subsection (a)(8), the local furnishing of electric energy or gas
from a facility shall only include furnishing solely within the
area consisting of-

    (1) a city and 1 contiguous county, or

    (2) 2 contiguous counties.

(g) Local district heating or cooling facility.

    (1) In general.  For purposes of subsection (a)(9), the term
"local district heating or cooling facility" means property used
as an integral part of a local district heating or cooling
system.

    (2) Local district heating or cooling system.

    (A) In general.  For purposes of paragraph (1), the term
"local district heating or cooling system" means any local system
consisting of a pipeline or network (which may be connected to a
heating or cooling source) providing hot water, chilled water, or
steam to 2 or more users for-

    (i) residential, commercial, or industrial heating or
cooling, or

    (ii) process steam.

    (B) Local system.  For purposes of this paragraph, a local
system includes facilities furnishing heating and cooling to an
area consisting of a city and 1 contiguous county.

(h) Qualified hazardous waste facilities.  For purposes of
subsection (a)(10), the term "qualified hazardous waste facility"
means any facility for the disposal of hazardous waste by
incineration or entombment but only if-

    (1) the facility is subject to final permit requirements
under subtitle C of title II of the Solid Waste Disposal Act (as
in effect of the date of the enactment of the Tax Reform Act of
1986), and

    (2) the portion of such facility which is to be provided by
the issue does not exceed the portion of the facility which is to
be used by persons other than-

    (A) the owner or operator of such facility, and

    (B) any related person (within the meaning of section
144(a)(3)) to such owner or operator.

(i) High-speed intercity rail facilities.

    (1) In general.  For purposes of subsection (a)(11), the
term "high-speed intercity rail facilities" means any facility
(not including rolling stock) for the fixed guideway rail
transportation of passengers and their baggage between
metropolitan statistical areas (within the meaning of section
143(k)(2)(B)) using vehicles that are reasonably expected to
operate at speeds in excess of 150 miles per hour between
scheduled stops, but only if such facility will be made available
to members of the general public as passengers.

    (2) Election by nongovernmental owners.  A facility shall be
treated as described in subsection (a)(11) only if any owner of
such facility which is not a governmental unit irrevocably elects
not to claim-

    (A) any deduction under section 167 or 168, and

    (B) any credit under this subtitle,

    with respect to the property to be financed by the net
proceeds of the issue.

    (3) Use of proceeds.  A bond issued as part of an issue
described in subsection (a)(11) shall not be considered an exempt
facility bond unless any proceeds not used within a 3-year period
of the date of the issuance of such bond are used (not later than
6 months after the close of such period) to redeem bonds which
are part of such issue.