ISSUES USED TO ACQUIRE NONGOVERNMENTAL OUTPUT PROPERTY.

SEC. 10631. ISSUES USED TO ACQUIRE NONGOVERNMENTAL OUTPUT PROPERTY. (a) In General.— Section 141 is amended by redesignating subsection (d) as subsection (e) and by inserting after subsection (c) the following new subsection: “(d) Certain Issues Used To Acquire Nongovernmental Output Property Treated as Private Activity Bonds.— “(1) In general.— For purposes of this title, the term ‘private activity bond’ includes any bond issued as part of an issue if the amount of the proceeds of the issue which are to be used (directly or indirectly) for the acquisition by a governmental unit of nongovernmental output property exceeds the lesser of— “(A) 5 percent of such proceeds, or “(B) $5,000,000. “(2) Nongovernmental output property.— Except as otherwise provided in this subsection, for purposes of paragraph (1), the term ‘nongovernmental output property’ means any property (or interest therein) which before such acquisition was used (or held for use) by a person other than a governmental unit in connection with an output facility (within the meaning of subsection (b)(4)) (other than a facility for the furnishing of water). For purposes of the preceding sentence, use (or the holding for use) before October 14, 1987, shall not be taken into account. 101 STAT. 1330–454 “(3) Exception for property acquired to provide output to certain areas.— For purposes of paragraph (1)— “(A) In general.— The term ‘nongovernmental output property’ shall not include any property which is to be used in connection with an output facility 95 percent or more of the output of which will be consumed in— “(i) a qualified service area of the governmental unit acquiring the property, or “(ii) a qualified annexed area of such unit. “(B) Definitions.— For purposes of subparagraph (A)— “(i) Qualified service area.— The term ‘qualified service area’ means, with respect to the governmental unit acquiring the property, any area throughout which such unit provided (at all times during the 10-year period ending on the date such property is acquired by such unit) output of the same type as the output to be provided by such property. For purposes of the preceding sentence, the period before October 14, 1987, shall not be taken into account. “(ii) Qualified annexed area.— The term ‘qualified annexed area’ means, with respect to the governmental unit acquiring the property, any area if— “(I) such area is contiguous to, and annexed for general governmental purposes into, a qualified service area of such unit, “(II) output from such property is made available to all members of the general public in the annexed area, and “(III) the annexed area is not greater than 10 percent of such qualified service area. “(C) Limitation on size of annexed area not to apply where output capacity does not increase by more than 10 percent.— Subclause (III) of subparagraph (B)(ii) shall not apply to an annexation of an area by a governmental unit if the output capacity of the property acquired in connection with the annexation, when added to the output capacity of all other property which is not treated as non-governmental output property by reason of subparagraph (A)(ii) with respect to such annexed area, does not exceed 10 percent of the output capacity of the property providing output of the same type to the qualified service area into which it is annexed. “(D) Rules for determining relative size, etc.— For purposes of subparagraphs (B)(ii) and (C)— “(i) The size of any qualified service area and the output capacity of property serving such area shall be determined as the close of the calendar year preceding the calendar year in which the acquisition of non-governmental output property or the annexation occurs. “(ii) A qualified annexed area shall be treated as part of the qualified service area into which it is annexed for purposes of determining whether any other area annexed in a later year is a qualified annexed area. “(4) Exception for property converted to nonoutput use.— For purposes of paragraph (1)— 101 STAT. 1330–455 “(A) In general.— The term ‘nongovernmental output property’ shall not include any property which is to be converted to a use not in connection with an output facility. “(B) Exception.— Subparagraph (A) shall not apply to any property which is part of the output function of a nuclear power facility. “(5) Special rules.— In the case of a bond which is a private activity bond solely by reason of this subsection— “(A) subsections (c) and (d) of section 147 (relating to limitations on acquisition of land and existing property) shall not apply, and “(B) paragraph (8) of section 142(a) shall be applied as if it did not contain ‘local’. “(6) Treatment of joint action agencies.— With respect to nongovernmental output property acquired by a joint action agency the members of which are governmental units, this subsection shall be applied at the member level by treating each member as acquiring its proportionate share of such property.” (b) Technical Amendment.— Subparagraph (A) of section 146(15(5) is amended to read as follows: “(A) the purpose of issuing exempt facility bonds described in 1 of the paragraphs of section 142(a),”. (c) Effective Date.— (1) In general.— Except as otherwise provided in this subsection, the amendments made by this section shall apply to bonds issued after October 13, 1987 (other than bonds issued to refund bonds issued on or before such date). (2) Binding agreements.— The amendments made by this section shall not apply to bonds (other than advance refunding bonds) with respect to a facility acquired after October 13, 1987, pursuant to a binding contract entered into on or before such date. (3) Transitional rule.— The amendments made by this section shall not apply to bonds issued— (A) after October 13, 1987, by an authority created by a statute— (i) approved by the State Governor on July 24, 1986 and (ii) sections 1 through 10 of which became effective on January 15, 1987, and (B) to provide facilities serving the area specified in such statute on the date of its enactment.