WASHINGTON -- The Internal Revenue Service has reissued a private letter ruling clarifying that a municipal electric authority can use tax-exempt bonds to finance improvements to a transmission system that moves power from a privately owned co-generation facility to a private electric utility.

Bond lawyers were pleased with the reissued ruling, PLR 9123038, saying it uses new facts to make it clearer that public utilities, in certain circumstances, can transmit power between private investor-owned utilities without running afoul of a private-use test that could make their bonds private-activity bonds and possibly taxable.

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