Section 144. Qualified small issue bond; qualified student loan bond; qualified redevelopment bond
(a) Qualified small issue bond.
(1) In general. For purposes of this part, the term "qualified small issue bond" means any bond issued as part of an issue the aggregate authorized face amount of which is $1,000,000 or less and 95 percent or more of the net proceeds of which are to be used-
(A) for the acquisition, construction, reconstruction, or improvement of land or property of a character subject to the allowance for depreciation, or
(B) to redeem part or all of a prior issue which was issued for purposes described in subparagraph (A), or this subparagraph.
(2) Certain prior issues taken into account. If-
(A) the proceeds of 2 or more issues of bonds (whether or not the issuer of each such issue is the same) are or will be used primarily with respect to facilities located in the same incorporated municipality or located in the same county (but not in any incorporated municipality).
(B) the principal user of such facilities is or will be the same person or 2 or more related persons, and
(C) but for this paragraph, paragraph (1) (or the corresponding provision of prior law) would apply to each such issue,
then, for purposes of paragraph (1), in determining the aggregate face amount of any later issue there shall be taken into account the aggregate face amount of tax-exempt bonds issued under all prior such issues and outstanding at the time of such later issue (not including as outstanding any bond which is to be redeemed (other than in an advance refunding) from the net proceeds of the later issue).
(3) Related persons. For purposes of this subsection, a person is a related person to another person if-
(A) the relationship between such persons would result in a disallowance of losses under section 267 or 707(b), or
(B) such persons are members of the same controlled group of corporations (as defined in section 1563(a), except that "more than 50 percent" shall be substituted for "at least 80 percent" each place it appears therein).
(4) $10,000,000 limit in certain cases.
(A) In general. At the election of the issuer with respect to any issue, this subsection shall be applied-
(i) by substituting "$10,000,000" for "$1,000,000 in paragraph (1), and
(ii) in determining the aggregate face amount of such issue, by taking into account not only the amount described in paragraph (2), but also the aggregate amount of capital expenditures with respect to facilities described in subparagraph (B) paid or incurred during the 6-year period beginning 3 years before the date of such issue and ending 3 years after such date (and financed otherwise than to of the proceeds of outstanding tax- exempt issues to which paragraph (1) (or the corresponding provision of prior law) applied), as if the aggregate amount of such capital expenditures constituted the face amount of a prior outstanding issue described in paragraph (2).
(B) Facilities taken into account. For purposes of subparagraph (A)(ii), the facilities described in this subparagraph are facilities-
(i) located in the same incorporated municipality or located in the same county (but not in any incorporated municipality), and
(ii) the principal user of which is or will be the same person or 2 or more related persons.
For purposes of clause (i), the determination of whether or not facilities are located in the same governmental unit shall be made as of the date of issue of the issue in question.
(C) Certain capital expenditures not taken into account. For purposes of subparagraph (A)(II), any capital expenditure-
(i) to replace property destroyed or damaged by fire, storm, or other casualty, to the extent of the fair market value of the property replaced,
(ii) required by a change made after the date of issue of the issue in question in a Federal or State law or local ordinance of general application or required by a change made after such date in rules and regulations of general application issued under such a law or ordinance.
(iii) required by circumstances which could not be reasonably foreseen on such date of issue or arising out of a mistake of law or fact (but the aggregate amount of expenditures not taken into account under this clause with respect to any issue shall not exceed $1,000,000), or
(iv) described in clause (i) or (ii) of section 41(b)(2)(A) for which a deduction was allowed under section 174(a),
shall not be taken into account.
(D) Limitation of loss of tax exemption. In applying subparagraph (A)(ii) with respect to capital expenditures made after the date of any issue, not bond issued as a part of such issue shall cease to be treated as a qualified small issue bond by reason of any such expenditure for any period before the date on which such expenditure is paid or incurred.
(E) Certain refinancing issues. In the case of any issue described in paragraph (1)(B), an election may be made under subparagraph (A) of this paragraph only if all of the prior issues being redeemed are issues to which paragraph (1) (or the corresponding provision of prior law) applied. In applying subparagraph (A)(ii) with respect to such a refinancing issue, capital expenditures shall be taken into account only for purposes of determining whether the prior issues being redeemed qualified (and would have continued to qualify) under paragraph (1) (or the corresponding provision of prior law).
(F) Aggregate amount of capital expenditures where there is urban development action grant. If the case of any issue 95 percent or more of the net proceeds of which are to be used to provide facilities with respect to which an urban development action grant has been made under section 119 of the Housing and Community Development Act of 1974, capital expenditures of not to exceed $10,000,000 shall not be taken into account for purposes of applying subparagraph (A)(ii).
(5) Issues for residential purposes. This subsection shall not apply to any bond issued as part of an issue 5 percent or more of the net proceeds of which are to be used directly or indirectly to provide residential real property for family units.
(6) Limitations on treatment of bonds as part of the same issue.
(A) In general. For purposes of this subsection, separate lots of bonds which (but for this subparagraph) would be treated as part of the same issue shall be treated as separate issues unless the proceeds of such lots are to be used with respect to 2 or more facilities-
(i) which are located in more than 1 State, or
(ii) which have, or will have, as the same principal user the same person or related persons.
(B) Franchises. For purposes of subparagraph (A), a person (other than a governmental unit) shall be considered a principal user of a facility if such person (or a group of related persons which includes such person)-
(i) guarantees, arranges, participates in, or assists with the issuance (or pays any portion of the cost of issuance) of any bond the proceeds of which are to be used to finance or refinance such facility, and
(ii) provides any property, or any franchise, trademark, or trade name (within the meaning of section 1253), which is to be used in connection with such facility.
(7) Subsection not to apply if bonds issued with certain other tax-exempt bonds. This subsection shall not apply to any bond issued as part of an issue (other than an issue to which paragraph (4) applies) if the interest on any other bond which is part of such issue is excluded from gross income under any provision of law other than this subsection.
(8) Restrictions on financing certain facilities. This subsection shall not apply to an issue if-
(A) more than 25 percent of the net proceeds of the issue are to be used to provide a facility the primary purpose of which is one of the following: retail food and beverage services, automobile sales or service, or the provision of recreation or entertainment; or
(B) any portion of the proceeds of the issue is to be used to provide the following: any priv
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