This bill creates a safe harbor for certain perpetual trust funds. It excludes from the definition of investment property under arbitrage provisions any fund created and controlled by a state and established pursuant to its constitution or state law if on a specified date, substantially all of the assets of the fund consist of nonfinancial assets and the assets are used only to support specifically designated essential governmental functions.
To amend the Internal Revenue Code of 1986 to create a safe harbor for 
                     certain perpetual trust funds.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SAFE HARBOR FOR CERTAIN PERPETUAL TRUST FUNDS.

    (a) In General.--Section 148(b) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(5) Safe harbor for certain perpetual trust funds.--The 
        term `investment property' does not include any fund created 
        and controlled by a State and established pursuant to its 
        constitution or State law if--
                    ``(A) substantially all of the assets of the fund 
                consist of nonfinancial assets, revenues derived from 
                such assets, gifts, appropriations, or bequests,
                    ``(B) the assets of the fund may be used only to 
                support specifically designated essential governmental 
                functions (within the meaning of section 115(1)) that 
                are carried out by political subdivisions with general 
                taxing powers or public elementary and public secondary 
                schools,
                    ``(C) the assets of the fund are required to 
                support designated functions,
                    ``(D) to the extent the fund guarantees 
                obligations, such obligations are not private activity 
                bonds (other than qualified 501(c)(3) bonds) 
                substantially all of the proceeds of which are to be 
                used for designated functions, and
                    ``(E) the fund satisfied each of the requirements 
                of subparagraphs (A) through (D) on August 16, 1986.''.
    (b) Effective Date.--The amendment made by this section shall take 
effect on the date of the enactment of this Act.
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To amend the Internal Revenue Code of 1986 to create a safe harbor for certain perpetual trust funds.
To amend the Internal Revenue Code of 1986 to create a safe harbor for certain perpetual trust funds.
Official Titles - House of Representatives
Official Title as Introduced
To amend the Internal Revenue Code of 1986 to create a safe harbor for certain perpetual trust funds.
Rep. Doggett, Lloyd