{"id":4889,"date":"2023-04-05T15:08:01","date_gmt":"2023-04-05T15:08:01","guid":{"rendered":"https:\/\/qa.www.purdue.edu\/treasurer\/finance\/\/?page_id=4889"},"modified":"2026-02-24T13:37:45","modified_gmt":"2026-02-24T18:37:45","slug":"private-business-use-rules-and-expectations","status":"publish","type":"page","link":"https:\/\/www.purdue.edu\/treasurer\/finance\/financial-planning-and-analysis\/borrowing-information\/private-business-use-rules-and-expectations\/","title":{"rendered":"Private Business Use Rules and Expectations"},"content":{"rendered":"\n
\n
\n

Private Business Use Rules and Expectations<\/h1>\n\n\n

General Description <\/strong><\/h2>\n\n\n\n

The direct or indirect use by agreement or contract of a tax-exempt financed facility in a trade or business carried on by any person other than a governmental unit. At Purdue, most PBU is usually measured in square feet used by the third party.<\/strong><\/p>\n\n\n\n

<\/p>\n\n\n\n

Exceptions<\/strong><\/h2>\n\n\n\n

10% Safe Harbor<\/h3>\n\n\n\n
    \n
  • Based on allocation of construction costs between bond proceeds and equity.<\/li>\n\n\n\n
  • Allows ratio of up to 10% of bond proceeds (plus all of equity) to be used by 3rd party.<\/li>\n<\/ul>\n\n\n\n

    General Public Use<\/h3>\n\n\n\n
      \n
    • Reasonably available to general public without business or trade regardless of for or not-for-profit status.<\/li>\n\n\n\n
    • Must not exceed 200 days, including all renewals.<\/li>\n<\/ul>\n\n\n\n

      Management Contracts<\/h3>\n\n\n\n
        \n
      • Compliant with 97-13 restrictions, largely around basis of compensation and term.<\/li>\n\n\n\n
      • 2016-44 relaxes some of the restrictions for long-term (P3) contracts up to 30 years.<\/li>\n\n\n\n
      • See \u201cSafe Harbors and Exceptions.\u201d<\/li>\n<\/ul>\n\n\n\n

        Short-Term Contracts<\/h3>\n\n\n\n
          \n
        • Less than 50 days, including any renewals.<\/li>\n\n\n\n
        • Certain other exceptions for short-term durations.<\/li>\n<\/ul>\n\n\n\n

          Governmental Improvements<\/h3>\n\n\n\n

           (i.e., Repair and Rehabilitation and Qualified Energy Savings)<\/p>\n\n\n\n

            \n
          • Made to building owned by the Issuer.<\/li>\n\n\n\n
          • Facility was placed in service more than one year before the improvement undertaken.<\/li>\n\n\n\n
          • Not an enlargement or improvement in interior space occupied exclusively for any private business use.<\/li>\n\n\n\n
          • No portion of the building meets private security test (e.g., more than 10% of payments made by 3rd party).<\/li>\n\n\n\n
          • No more than 15% of building is for private business use.<\/li>\n<\/ul>\n\n\n\n

            Research<\/h3>\n\n\n\n
              \n
            • Sponsor gets no more than non-exclusive royalty-free license of intellectual property.<\/li>\n\n\n\n
            • Certain measures of independence must be allowed to the researcher and cannot be stipulated by the sponsor.<\/li>\n<\/ul>\n\n\n\n

              Incidental Use<\/h3>\n\n\n\n
                \n
              • Contractual use for vending machines, phones, etc. as long as the total space does not exceed 2.5% of the facility.<\/li>\n<\/ul>\n\n\n\n

                Possible Compliance Issues<\/strong><\/h2>\n\n\n\n
                  \n
                • Non-compliant management contracts.<\/li>\n\n\n\n
                • Sale or transfer of building ownership.<\/li>\n\n\n\n
                • Naming rights, which convey special legal entitlement or economic benefit to 3rd party. <\/li>\n\n\n\n
                • Joint venture, which convey special legal entitlement or economic benefit to 3rd party. <\/li>\n<\/ul>\n\n\n\n

                  Measuring PBU<\/strong><\/h2>\n\n\n\n
                    \n
                  • Annual requirement to analyze compliance of PBU limits.<\/li>\n\n\n\n
                  • Compliance is on debt series, not facility, basis.<\/li>\n\n\n\n
                  • Compliance is through life of series, although non-compliant status at any point in time could be of concern.<\/li>\n<\/ul>\n<\/div>\n<\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":8,"featured_media":0,"parent":1005,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-4889","page","type-page","status-publish","hentry"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/pages\/4889","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/users\/8"}],"replies":[{"embeddable":true,"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/comments?post=4889"}],"version-history":[{"count":2,"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/pages\/4889\/revisions"}],"predecessor-version":[{"id":4911,"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/pages\/4889\/revisions\/4911"}],"up":[{"embeddable":true,"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/pages\/1005"}],"wp:attachment":[{"href":"https:\/\/www.purdue.edu\/treasurer\/finance\/wp-json\/wp\/v2\/media?parent=4889"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}