Code Section 144
| Code Section | Effective Date | Name of Act | Name of Provision | 10yr Revenue Estimate ($millions) |
|---|---|---|---|---|
| 144(a) | 1/1/2011 | The American Recovery and Reinvestment Act of 2009 (Public Law 111-5) | Temporary expansion of availability of industrial development bonds to facilities creating intangible property and other modifications | -203 |
Temporary expansion of availability of industrial development bonds to facilities creating intangible property and other modifications
Explanation of Provision
In General
For bonds issued after the date of enactment and before January 1, 2011, the provision expands the definition of manufacturing facilities to mean any facility that is used in the manufacturing, creation, or production of tangible property or intangible property (within the meaning of section 197(d)(1)(C)(iii)). For this purpose, intangible property means any patent, copyright, formula, process, design, knowhow, format, or other similar item. It is intended to include among other items, the creation of computer software, and intellectual property associated bio-tech and pharmaceuticals.
In lieu of the directly related and ancillary test of present law, the provision provides a special rule for bonds issued after the date of enactment and before January 1, 2011. For these bonds, the provision provides that facilities that are functionally related and subordinate to the manufacturing facility are treated as a manufacturing facility and the 25 percent of net proceeds restriction does not apply to such facilities.171 Functionally related and subordinate facilities must be located on the same site as the manufacturing facility.
171 The provision is based in part on a similar rule applicable to exempt facility bonds. Treas. Reg. sec. 1.103–8(a)(3) provides: ‘‘(3) Functionally related and subordinate. An exempt facility includes any land, building, or other property functionally related and subordinate to such facility. Property is not functionally related and subordinate to a facility if it is not of a character and size commensurate with the character and size of such facility.’’
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