IRS written determination 201519015

Private letter rulings and published taxpayer determination letters. Native document type is retained separately; a determination letter is not labeled a private letter ruling. These taxpayer-specific releases cannot be used or cited as precedent under 26 USC 6110(k)(3); applicability and current legal force are not independently certified. Keep repeated UILC subjects attached to one actual numbered document.

Internal Revenue Service
Department of the Treasury
Washington, DC 20224
Number: 201519015
Release Date: 5/8/2015
Index Number: 141.01-02
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
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Telephone Number:
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Refer Reply To:
CC:FIP:05
PLR-133989-14
Date:
February 03, 2015
Legend
Issuer= -------------------------------------------------------------------
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Bonds= -------------------------------------------------------------------
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State= -----------------------------
a= ----------------
Dear -----------------:
This letter is in response to your request for a ruling that the Fare Revenues collected
by Issuer for bus service along the Managed Lanes are not payments in respect of the
Managed Lanes under section 141(b)(2)(B) of the Internal Revenue Code (the Code)
and §1.141-4 of the Income Tax Regulations.
Facts and Representations
Issuer is a political subdivision of State. Issuer providesbus transportation services to
members of the general public within a defined service area, which includes a portion of
a U.S. highway (the Highway). Issuer operates many bus routes throughout its service
area, including some routes that use the Highway.
Members of the general public pay Issuer certain published fares to ride on Issuer’s
busses (the Fare Revenues). Some riders pay for each individual ride, while others
purchase monthly or annual passes that permit unlimited rides during the relevant
period. The price of each individual ride or pass varies depending on whether the rider
will travel on local, express, or regional routes.

PLR-133989-14
2
State’s department of transportation and one of its divisions (together, SDOT) have
begun a project to improve the Highway. This project will include the segregation and
construction of one managed lane running in each direction on the Highway (these two
lanes collectively are the Managed Lanes). A private concessionaire will operate the
Managed Lanes pursuant to a management contract that Issuer represents will result in
private business use under §1.141-3(b)(4).
On some of its regional and express routes, Issuer’s busses will transport passengers
over the Managed Lanes. The distance traveled over a Managed Lane may constitute
only a portion of the total distance travelled over a specific route. Thus, on certain
routes, a passenger that travels over a Managed Lane may continue to be transported
beyond the Managed Lane.
The fares that Issuer charges for travel on its bus routes over the Managed Lanes will
be the same as the fares that it charges for travel on its express and regional routes that
do not travel on the Managed Lanes. Thus, Issuer will not charge passengers a
premium to travel by bus over a Managed Lane.
Pursuant to an agreement with SDOT, Issuer will contribute approximately $a to the
construction of the Managed Lanes and will finance certain equipment along the
Managed Lanes that will be owned and used by Issuer in its bus operations. Issuer
intends to use proceeds of the Bonds to finance a portion of these expenses.
Law and Analysis
Section 54AA(d)(1) defines the term “build America bond” for purposes of §54AA as
any obligation (other than a private activity bond) if the interest on such obligation would
(but for §54AA) be excludable from gross income under §103, such obligation is
issued before January 1, 2011, and the issuer makes an irrevocable election to have
this section apply.
Section 103(a) provides that, except as provided in §103(b), gross income does not
include interest on any State or local bond. Section 103(b) provides that §103(a) shall
not apply to any private activity bond which is not a qualified bond (within the meaning
of § 141). Section 141(a) provides in part that the term “private activity bond” means
any bond issued as part of an issue which meets the private business use test of
§ 141(b)(1) and the private security or payment test of §141(b)(2). Section 141(b)(2)
provides in part that an issue meets the private securityor payment test if the payment
of the principal of, or the interest on, more than 10 percent of the proceeds of such
issue is (under the terms of such issue or any underlying arrangement) directly or
indirectly to be derived from payments (whether or not to the issuer) in respect of
property, or borrowed money, used or to be used for a private business use.

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Section 1.141-4(a)(1) provides in part that the private payment portion of the private
security or payment test takes into account the payment of the debt service on the issue
that is directly or indirectly to be derived from payments (whether or not to the issuer or
any related party) in respect of property, or borrowed money, used or to be used for a
private business use. Section 1.141-4(c)(2)(i)(A) provides that both direct and indirect
payments made by any nongovernmental person that is treated as using proceeds of
the issue are taken into account as private payments to the extent allocable to the
proceeds used by that person. Payments for a use ofproceeds include payments
(whether or not to the issuer) in respect of property financed (directly or indirectly) with
those proceeds, even if not made by a private business user.
The Fare Revenues will have little connection to the Managed Lanes. The fares Issuer
charges for travel on its bus routes over the Managed Lanes will be the same as the
fares it charges for travel on its express and regional routes that do not travel on the
Managed Lanes. Issuer operates many bus routes throughout its service area, only
some of which will travel over the Managed Lanes. Even for those routes on which
passengers will travel over Managed Lanes, the distance traveled over a Managed
Lane may constitute only a portion of the total distance travelled during that trip.
Conclusion
Based strictly on the information submitted and representations made, we conclude that
the Fare Revenues collected by Issuer for bus service along the Managed Lanes are
not payments in respect of the Managed Lanes under section 141(b)(2)(B) and
§ 1.141-4.
Except as expressly provided herein, no opinion is expressed or implied concerning the
tax consequences of any aspect of any transaction or item discussed or referenced in
this letter.
This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of the Code
provides that it may not be used or cited as precedent.
In accordance with the Power of Attorney on file with this office, a copy of this letter is
being sent to your authorized representative.

PLR-133989-14
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The rulings contained in this letter are based upon information and representations
submitted by the taxpayer and accompanied by a penalty of perjury statement executed
by an appropriate party. While this office has not verified any of the material submitted
in support of the request for rulings, it is subject to verification on examination.
Sincerely,
/S/
James A. Polfer
Branch Chief
(Financial Institutions & Products)