August 29, 2016
Tax Alert for State and Municipal Bond Issuers: IRS Updates Safe Harbor Provisions for Management Contracts
Facilities financed with tax-exempt bonds for the benefit of governmental users or 501(c)(3) corporations (the “qualified users”) are subject to restrictions on private business use of the facility. Under Section 141 of the Internal Revenue Code, management contracts, which include management, service and incentive payment contracts, can give rise to private business use and need to be monitored.
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