Bonds issued for skyboxes, airplanes, gambling establishments, etc. (I.R.C. 147(e))

Law

Section 147(e) provides the following regarding the prohibition to issue bonds for skyboxes, airplanes, gambling establishments, etc.:

(e) No portion of bonds may be issued for skyboxes, airplanes, gambling establishments, etc. A private activity bond shall not be a qualified bond if issued as part of an issue and any portion of the proceeds of such issue is to be used to provide any airplane, skybox or other private luxury box, health club facility, facility primarily used for gambling, or store the principal business of which is the sale of alcoholic beverages for consumption off premises.

Resources

PLR 8626047 (Mar. 27, 1986): Project includes a hotel building with bar, restaurant, indoor swimming pool, whirlpool, sauna, fitness center, meeting rooms and convention facilities.  Bond proceeds and equity are used to finance the facility.  The costs of the restaurant, swimming pool, whirlpool, sauna and fitness center are paid from the partners’ equity contributions.  Common costs will be split in proportion to relative usage of those bad facilities in comparison to usage of the hotel rooms. “Because no more than 25 percent of the bond proceeds are allocable to portions of the facility which will be used primarily for retail food or beverage service or for the provision of recreation or entertainment, we conclude that the primary purpose of the hotel building and the 1.31 acre site is for the provision of lodging for the hotel guests.  Therefore, the proceeds of the Bonds will not be used to provide a facility the primary purpose of which is retail food and beverage services or the provision of recreation or entertainment, nor will any portion of the proceeds be used to provide a country club or hot tub facility within the meaning of section 103(b)(6)(O) of the Code.  In addition, we conclude that no portion of the proceeds of the bonds will be used to provide any health club facility within the meaning of section 103(b)(18) of the Code.”

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