Qualified 501(c) (3) Bonds Law and Legal Definition

According to 26 USCS § 150 (b) (3)[Title 26. Internal Revenue Code; Subtitle A. Income Taxes; Chapter 1. Normal Taxes and Surtaxes; Subchapter B. Computation of Taxable Income; Part IV. Tax Exemption Requirements for State and Local Bonds; Subpart C. Definitions and Special Rules],

“(A) In general. In the case of any facility with respect to which financing is provided from the proceeds of any private activity bond which, when issued, purported to be a tax-exempt qualified 501(c)(3) bond, if any portion of such facility--

(i) is used in a trade or business of any person other than a 501(c)(3) organization or a governmental unit, but

(ii) continues to be owned by a 501(c)(3) organization,

then the owner of such portion shall be treated for purposes of this title as engaged in an unrelated trade or business (as defined in section 513 [26 USCS § 513]) with respect to such portion. The amount of gross income attributable to such portion for any period shall not be less than the fair rental value of such portion for such period.

(B) Denial of deduction for interest. No deduction shall be allowed under this chapter [26 USCS §§ 1 et seq.] for interest on financing described in subparagraph (A) which accrues during the period beginning on the date such facility is used as described in subparagraph (A)(i) and ending on the date such facility is not so used.”