WASHINGTON -- A recent ruling shows that while the Internal Revenue Service has not updated guidance on management contracts to reflect 1986 tax law changes, it is using the changes to determine whether such contracts result in too much private use of bond-financed projects.

In the private letter ruling, which did not identify the parties involved, the IRS concluded that proposed contractual arrangements would not prevent a nonprofit corporation from borrowing tax-exempt 501(c)(3) bonds to finance a large, mixed-use commercial project in an economically distressed area.

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