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PRIVATE BUSINESS USE OF BOND-FINANCED PROPERTY

The use of a facility financed with TEBs by any person or entity that is (1) not a state or local governmental entity, or (2) an entity described in section 501(c)(3) of the Code which is exempt from tax under section 501(a) of the Code, other than a 501(c)(3) entity that is using any portion of the financed facilities in an unrelated trade or business (a “Non-exempt Person”), may be considered a private business use (PBU) of the bond-financed property.

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1. Sale or Other Transfer of Ownership of Bond-Financed Property
1. The transfer of ownership of any portion of the property financed with TEBs to any Non-exempt Person is both a PBU, and is directly prohibited by the Internal Revenue Code, if it occurs prior to the earlier of the end of the expected economic life of the property, or the latest maturity date of any TEBs financing (or refinancing) the property (the “measurement period”).
2. The Senior Vice President for Finance and CFO will assure that ownership of property financed with TEBs will not be transferred prior to expiration of the applicable measurement period.
2. Leases/Rentals of Bond-Financed Property
1. Requests to use university facilities that are tax-exempt financed must be submitted to the Senior Vice President for Finance and CFO for review and approval under the following conditions:
1. Use of a University facility by one or more Rowan University employees to operate a trade or business not owned or operated by the university, or
2. Use of any facility by individuals not employed by the university or by non-Rowan University and nongovernmental organizations (private parties).
2. Exempted from the requirement to submit to the Accounting Services for review and approval are rental and facility use arrangements that meet the following stipulations:
1. The university facility use or rental arrangement with an external (non-Rowan University) party is for no more than 50 days of total use, e.g., every Saturday and Sunday for 15 weeks, totaling 30 days of use (the days of use do not have to be consecutive days), and
2. Fair market value is charged for the use of space. To determine whether fair market value is being charged for the use of the space, each Rowan University department handling a facility use negotiation is to consult with the Director of Accounting Services.
3. There may be a provision in the rental or use agreement to automatically renew for additional periods of 50 days or less of total use as long as either party has the right to not renew.
4. Long-term leases (over 50 days) for use of Rowan University facilities by parties other than the University must be reviewed by General Counsel and the Senior Vice President for Finance and CFO. The University will consult with bond counsel when needed prior to any long-term use of TEB facilities by outside parties. This policy only applies to facility use by non- Rowan University parties in a Rowan University facility that is tax-exempt financed. A list of facilities financed with tax-exempt bonds is located in Attachment 2 of this document.
5. The Accounting Services Department is responsible for maintaining a list of the University facilities leased to third parties. The department also maintains a schedule detailing space, length of rental or use and amount received for each such rental use. The University reviews such records with the appropriate parties, which may include bond counsel, on at least an annual basis. If a use is determined to constitute PBU, the University may consult with bond counsel.
3. Management Contracts
1. A management contract is defined by the IRS as a management, service or incentive payment contract with a service provider under which the service provider provides services involving all or a portion of any function of a facility. Examples would include food service and bookstore, where the outside company has an ongoing presence in or control of the facility. Exemptions include contracts that are solely incidental to the primary exempt purpose for which the facility is used, including janitorial services and office equipment repair.
2. The General Counsel and the Finance Division are responsible for identifying whether any management contract might constitute PBU. Any permitted PBU contracts will be tracked by the Accounting Services department.
4. Sponsored Research Agreements
1. The Office of Sponsored Programs will screen federal and state research agreements to determine if agreements are PBU. University Advancement will screen corporate and foundation research agreements to determine if agreements are PBU. Any PBU agreement must be approved by General Counsel and the Senior Vice President for Finance and CFO. The Accounting Services department will track any PBU contracts.
5. Unrelated Trade or Business (UTB) Activities
1. Use of bond proceeds or bond-financed property by a 501(c)(3) organization in an unrelated trade or business activity is treated as private business use for tax-exempt bond purposes.  An activity rises to the level of a trade or business only if it is carried on in a regular and continuous manner, is considerable in scope, and is entered into with the intent of realizing a profit. The fact that an activity does not actually produce a net profit in a given year is not sufficient to exclude it from the definition of trade or business.
2. The determination of whether an activity is UBT is determined based on a “facts and circumstances” analysis by the Finance Division.
3. The Accounting Services Department will monitor revenues for unrelated business taxable income (UBTI) and/or PBU.
6. Naming Rights
1. If the University enters into a contractual agreement giving a party legal entitlement to name a tax-exempt bond-financed facility, or portion thereof, after a for-profit entity, such contract may give rise to PBU with respect to the named space. The following naming opportunity will not be treated as PBU: if a facility is named for an individual or nonprofit entity whose name does not overlap with the name of a for-profit entity with which the person or nonprofit is associated.
2. University Advancement will identify all naming opportunities that do not fall within the exclusion described above and will refer them to the Accounting Services department for review and approval prior to any final decision or the execution of any enforceable agreement. Any approved PBU naming opportunities will be tracked by the Accounting Services department.
7. Other Actual or Beneficial Use of University Property
1. Any other arrangement that conveys special legal entitlements for beneficial use of the University property or that creates priority rights to the use or capacity of a facility must be reported to the Accounting Services department. The Accounting Services department, in conjunction with the General Counsel if appropriate, will determine if the use constitutes PBU. Those activities deemed to be PBU will be tracked by the Accounting Services department.