IRS written determination 201528035

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: 201528035
Release Date: 7/10/2015
Index Number: 150.00-00, 150.04-00
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Third Party Communication: None
Date of Communication: Not Applicable
Person To Contact:
----------------, ID No. ------------
Telephone Number:
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Refer Reply To:
CC:FIP:B05
PLR-144638-14
Date:
April 07, 2015
LEGEND:
Issuer=-----------------------------------------------------------
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Bonds=-----------------------------------------------------------
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Date 1=--------------------------
Date 2=-------------------
Date 3=------------------
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Date 7=------------------

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Dear -----------------:
This is in response to your request for a ruling that Issuer’s proposed actions to cease
status as a qualified scholarship funding corporation under § 150(d)(2) of the Internal
Revenue Code (the “Code”)will not cause interest on the Bonds to fail to be excludable
from gross income under § 103.
Facts and Representations
Issuer represents that it has been a corporation described in § 150(d)(2) since Date 1
and received a determination letter on Date 2 from the Internal Revenue Service stating
that it is an organization described in § 501(c)(3) and exempt from federal income tax
under § 501(a), both dates being prior to the issuance of the Bonds.
Issuer issued the Bonds on Dates 3, 4, 5, and 6, and remained the obligor on the Bonds
for the duration of time the Bonds were outstanding. Using cash from both student loan
payments and student loan sales, Issuer fully redeemed the Bonds by Date 7.
Following retirement of the Bonds, Issuer had no outstanding tax-exempt bonds.
Issuer proposes to amend its articles of incorporation and bylaws to expand its
charitable purposes as a § 501(c)(3) organization to include offering scholarships and
grants to deserving students. Issuer also represents that it will not issue any tax-
exempt bonds in the future.
Law and Analysis
Section 103(a) provides, with exceptions, that gross income does not include interest on
any State or local bond.
Section 150(d)(1) provides that a “qualified scholarship funding bond” is treated as a
State or local bond.
Section 150(d)(2) provides that the term “qualified scholarship funding bond” means a
bond issued by a corporation which –
(A) is a corporation not for profit established and operated exclusively for the
purpose of acquiring student loan notes incurred under the Higher Education Act of
1965, and
(B) is organized at the request of the State or 1 or more political subdivisions
thereof or is requested to exercise such power by 1 or more political subdivisions and
required by itscorporate charter and bylaws, or required by State law, to devote any

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income (after payment of expenses, debt service, and the creation of reserves for the
same) to the purchase of additional student loan notes or to pay over any income to the
United States.
Section 150(d)(3)(A) provides that any qualified scholarship funding bond, and qualified
student loan bond, outstanding on the date of the issuer’s election under that section
(and any bond (or series of bonds) issued to refund such a bond) shall not fail to be a
tax-exempt bond solely because the issuer ceases to be a corporation described in §
150(d)(2) if the issuer meets the requirements of subparagraphs (B) and (C) of that
section.
The requirements of § 150(d)(3)(B) are met by an issuer if –
(i) all of the student loan notes of the issuer and other assets pledged to secure
the repayment of qualified scholarship funding bond indebtedness of the issuer are
transferred to another corporation within a reasonable period after the election is made;
(ii) such transferee corporation assumes or otherwise provides for the payment of
all of the qualified scholarship funding bond indebtedness of the issuer within a
reasonable period after the election is made;
(iii) to the extent permitted by law, such transferee corporation assumes all of the
responsibilities, and succeeds to all of the rights, of the issuer under the issuer’s
agreements with the Secretary of Education in respect of student loans;
(iv) immediately after such transfer, the issuer, together with any other issuer
which has made an election under § 150(d)(3) in respect of such transferee, hold all of
the senior stock in such transferee corporation; and
(v) such transferee corporation is not exempt from tax under that chapter.
The requirementsof § 150(d)(3)(C) are met by an issuer if, within a reasonable period
after the transfer referred to in § 150(d)(3)(B) –
(i) the issuer is described in § 501(c)(3) and exempt from tax under § 501(a);
(ii) the issuer no longer is described in § 150(d)(2)(A) and (B); and
(iii) at least 80 percent of the members of the board of directors of the issuer are
independent members.
When an issuer has outstanding tax-exempt bonds, it may make an election to cease
status as a qualified scholarship funding corporation under § 150(d)(3), in which case it
must follow the requirements described in § 150(d)(3). The purpose of § 150(d)(3) is to

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preserve the tax-exempt status of an issuer’s qualified scholarship funding bonds and
qualified student loan bonds outstandingon the date of an issuer’s election (and any
bond (or series of bonds) issued to refund such bonds) despite the loss of an issuer’s
status as a qualified scholarship funding corporation. However, § 150(d)(3) is not
applicable in this case because Issuer has redeemed all its Bonds.
Regardless of the inapplicability of § 150(d)(3) in this case, Issuer’s proposed actions
will result in its ceasing to operate as a qualified scholarship funding corporation
described under § 150(d)(2). Because Issuer represents it was a corporation described
under § 150(d)(2) at the time the Bonds were issued, it was a corporation described
under § 150(d)(2) for the entire time the Bonds were outstanding, and it remained the
obligor on the Bonds the entire time they were outstanding, Issuer’s proposed actions
will not cause interest on the Bonds to fail to be excludable from gross income under
§ 103.
Conclusion
Based on the information submitted and representations made, we conclude that
Issuer’s proposed actions will not cause the interest on the Bonds to fail to be
excludable from gross income under § 103.
The ruling contained in this letter is based upon information and representations
submitted by Issuer and accompanied by a penalty of perjury statement executed by an
appropriate party. While this office has not verified any of the materials submitted in
support of the request for a ruling, it is subject to verification upon examination.
Except as expressly provided herein, no opinion is expressed or implied concerningthe
tax consequences of any transaction or item discussed or referenced in this letter.
This ruling is directed only to the taxpayer who requested it. Section 6110(k)(3)
provides that it may not be used or cited as precedent.
In accordance with a Powerof Attorney on file with this office, a copy of this letter is
being sent to Issuer’s authorized representative.
Sincerely,
Associate Chief Counsel
(Financial Institutions & Products)
By: _________/S/________________
James Polfer
Chief, Branch 5