Bond Fairness and Protection Act of 1999 - Amends the Internal Revenue Code, with respect to tax-exempt bond financing of certain electric facilities, to exclude a permitted open access transaction (as defined by this Act) from the definition of private business use.
Permits, as specified, termination of tax-exempt bond financing for certain electric output facilities.
[Congressional Bills 106th Congress]
[From the U.S. Government Publishing Office]
[S. 386 Introduced in Senate (IS)]
106th CONGRESS
1st Session
S. 386
To amend the Internal Revenue Code of 1986 to provide for tax-exempt
bond financing of certain electric facilities.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
February 6, 1999
Mr. Gorton (for himself, Mr. Kerrey, Mr. Jeffords, Mr. Hollings, Mr.
Thurmond, Mr. Harkin, Mrs. Murray, Mr. Smith of Oregon, Mr. Johnson,
and Mr. Wyden) introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to provide for tax-exempt
bond financing of certain electric facilities.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Bond Fairness and Protection Act of
1999''.
SEC. 2. TAX-EXEMPT BOND FINANCING OF CERTAIN ELECTRIC FACILITIES.
(a) Permitted Open Access Transactions Not a Private Business
Use.--Section 141(b)(6) of the Internal Revenue Code of 1986 (defining
private business use) is amended by adding at the end the following:
``(C) Permitted open access transactions not a
private business use.--
``(i) In general.--For purposes of this
subsection, the term `private business use'
shall not include a permitted open access
transaction.
``(ii) Permitted open access transaction
defined.--For purposes of clause (I), the term
`permitted open access transaction' means any
of the following transactions or activities
with respect to an electric output facility (as
defined in subsection (f)(4)(A)) owned by a
governmental unit:
``(I) Providing open access
transmission services and ancillary
services that meet the reciprocity
requirements of Federal Energy
Regulatory Commission Order No. 888, or
that are ordered by the Federal Energy
Regulatory Commission, or that are
provided in accordance with a
transmission tariff of an independent
system operator approved by such
Commission, or are consistent with
state administered laws, rules or
orders providing for open transmission
access.
``(II) Participation in an
independent system operator agreement
(which may include transferring control
of transmission facilities to an
independent system operator), in a
regional transmission group, or in a
power exchange agreement approved by
such Commission.
``(III) Delivery on an open access
basis of electric energy sold by other
entities to end-users served by such
governmental unit's distribution
facilities.
``(IV) If open access service is
provided under subclause (I) or (III),
the sale of electric output of electric
output facilities on terms other than
those available to the general public
if such sale is to an on-system
purchaser or is an existing off-system
sale.
``(V) Such other transactions or
activities as may be provided in
regulations prescribed by the
Secretary.
``(iii) Definitions; special rules.--For
purposes of this subparagraph--
``(I) On-system purchaser.--The
term `on-system purchaser' means a
person who purchases electric energy
from a governmental unit and whose
electric facilities or equipment are
directly connected with transmission or
distribution facilities that are owned
by such governmental unit.
``(II) Off-system purchaser.--The
term `off-system purchaser' means a
purchaser of electric energy from a
governmental unit other than an on-
system purchaser.
``(III) Existing off-system sale.--
The term `existing off-system sale'
means a sale of electric energy to a
person that was an off-system purchaser
of electric energy in the base year,
but not in excess of the kilowatt hours
purchased by such person in such year.
``(IV) Base year.--The term `base
year' means 1998 (or, at the election
of such unit, in 1996 or 1997).
``(V) Joint action agencies.--A
member of a joint action agency that is
entitled to make a sale described in
clause (ii)(IV) in a year may transfer
that entitlement to the joint action
agency in accordance with rules of the
Secretary.
``(VI) Government-owned facility.--
An electric output facility (as defined
in subsection (f)(4)(A)) shall be
treated as owned by a governmental unit
if it is owned or leased by such
governmental unit or if such
governmental unit has capacity rights
therein acquired before July 9, 1996,
for the purposes of serving one or more
customers to which such governmental
unit had a service obligation on such
date under state law or a requirements
contract.''.
(b) Election To Terminate Tax Exempt Financing.--Section 141 of the
Internal Revenue Code of 1986 (relating to private activity bond;
qualified bond) is amended by adding at the end the following:
``(f) Election To Terminate Tax-Exempt Bond Financing for Certain
Electric Output Facilities.--
``(1) In general.--An issuer may make an irrevocable
election under this paragraph to terminate certain tax-exempt
financing for electric output facilities. If the issuer makes
such election, then--
``(A) except as provided in paragraph (2), no bond
the interest on which is exempt from tax under section
103 may be issued on or after the date of such election
with respect to an electric output facility; and
``(B) notwithstanding paragraph (1) or (2) of
subsection (a) or paragraph (5) of subsection (b), with
respect to an electric output facility no bond that was
issued before the date of enactment of this subsection,
the interest on which was exempt from tax on such date,
shall be treated as a private activity bond, for so
long as such facility continues to be owned by a
governmental unit.
``(2) Exceptions.--An election under paragraph (1) does not
apply to--
``(A) any qualified bond (as defined in subsection
(e)),
``(B) any eligible refunding bond, or
``(C) any bond issued to finance a qualifying T&D
facility, or
``(D) any bond issued to finance equipment
necessary to meet Federal or state environmental
requirements applicable to, or repair of, electric
output facilities in service on the date of enactment
of this subsection. Repairs or equipment may not
increase by more than a de minimus degree the capacity
of the facility beyond its original design.
``(3) Form and effect of elections.--An election under
paragraph (1) shall be made in such a manner as the Secretary
prescribes and shall be binding on any successor in interest to
the electing issuer.
``(4) Definitions.--For purposes of this subsection--
``(A) Electric output facility.--The term `electric
output facility' means an output facility that is an
electric generation, transmission, or distribution
facility.
``(B) Eligible refunding bond.--The term `eligible
refunding bond' means state or local bonds issued after
an election described in paragraph (1) that directly or
indirectly refund state or local bonds issued before
such election, if the weighted averaged maturity of the
refunding bonds do not exceed the remaining weighted
average maturity of the bonds issued before the
election.
``(C) Qalifying t&d facility.--The term `qualifying
T&D facility' means--
``(i) transmission facilities over which
services described in subsection
(b)(6)(C)(ii)(I) are provided, or
``(ii) distribution facilities over which
services described in subsection
(b)(6)(C)(ii)(III) are provided.''.
(c) Effective Date, Applicability, and Transition Rules.--
(1) Effective date.--The amendments made by this section
take effect on the date of enactment of this Act, except that a
governmental unit may elect to apply section 141(b)(6)(C) of
the Internal Revenue Code of 1986, as added by subsection (a),
with respect to permitted open access transactions on or after
July 9, 1996.
(2) Applicability.--References in the Act to sections of
the Internal Revenue Code of 1986, as amended, shall be deemed
to include references to comparable sections of the Internal
Revenue Code of 1954, as amended.
(3) Transition rules.--
(A) Private business use.--Any activity that was
not a private business use prior to the effective date
of the amendment made by subsection (a) shall not be
deemed to be a private business use by reason of the
enactment of such amendment.
(B) Election.--An issuer making the election under
section 141(f) of the Internal Revenue Code of 1986, as
added by subsection (b), shall not be liable under any
contract in effect on the date of enactment of this Act
for any claim arising from having made the election.
<all>
Introduced in Senate
Read twice and referred to the Committee on Finance.
Sponsor introductory remarks on measure. (CR S1380-1381)
Subcommittee on Long-term Growth, Debt Reduction. Hearings held.
Sponsor introductory remarks on measure. (CR S7864)
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