118 STAT. 1603 PUBLIC LAW 108–357—OCT. 22, 2004 ‘‘(b) DISALLOWED LOSS CARRIED TO NEXT YEAR.—Any tax exempt use loss with respect to any tax exempt use property which is disallowed under subsection (a) for any taxable year shall be treated as a deduction with respect to such property in the next taxable year. ‘‘(c) DEFINITIONS.—For purposes of this section— ‘‘(1) TAX EXEMPT USE LOSS.—The term ‘tax exempt use loss’ means, with respect to any taxable year, the amount (if any) by which— ‘‘(A) the sum of— ‘‘(i) the aggregate deductions (other than interest) directly allocable to a tax exempt use property, plus ‘‘(ii) the aggregate deductions for interest properly allocable to such property, exceed ‘‘(B) the aggregate income from such property. ‘‘(2) TAX EXEMPT USE PROPERTY.—The term ‘tax exempt use property’ has the meaning given to such term by section 168(h), except that such section shall be applied— ‘‘(A) without regard to paragraphs (1)(C) and (3) thereof, and ‘‘(B) as if property described in— ‘‘(i) section 167(f)(1)(B), ‘‘(ii) section 167(f)(2), and ‘‘(iii) section 197 intangible, were tangible property. Such term shall not include property which would (but for this sentence) be tax exempt use property solely by reason of section 168(h)(6) if any credit is allowable under section 42 or 47 with respect to such property. ‘‘(d) EXCEPTION FOR CERTAIN LEASES.—This section shall not apply to any lease of property which meets the requirements of all of the following paragraphs: ‘‘(1) AVAILABILITY OF FUNDS.— ‘‘(A) IN GENERAL.—A lease of property meets the requirements of this paragraph if (at any time during the lease term) not more than an allowable amount of funds are— ‘‘(i) subject to any arrangement referred to in subparagraph (B), or ‘‘(ii) set aside or expected to be set aside, to or for the benefit of the lessor or any lender, or to or for the benefit of the lessee to satisfy the lessee’s obliga tions or options under the lease. For purposes of clause (ii), funds shall be treated as set aside or expected to be set aside only if a reasonable person would conclude, based on the facts and circumstances, that such funds are set aside or expected to be set aside. ‘‘(B) ARRANGEMENTS.—The arrangements referred to in this subparagraph include a defeasance arrangement, a loan by the lessee to the lessor or any lender, a deposit arrangement, a letter of credit collateralized with cash or cash equivalents, a payment undertaking agreement, prepaid rent (within the meaning of the regulations under section 467), a sinking fund arrangement, a guaranteed investment contract, financial guaranty insurance, and any similar arrangement (whether or not such arrangement provides credit support).
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