Financial Services Manual (FIN)

Effective: 7/1/2005

Revised: 8/1/2021

FIN 126: Private Use of University Facilities

Purpose

To ensure appropriate use of university facilities and equipment that is acquired with advantaged financing.

Sources

Internal Revenue Service regulations

University policy

Background

The University issues tax-advantaged debt to take advantage of interest savings to finance facilities and equipment. When facilities and equipment are funded with tax-advantaged debt, legal limitations govern how ASU can use the property for the duration of the financing. Use of the property by ASU, or a local government, would generally be considered “good use” and does not count against the legal limitation. Use by other parties generally is considered “private use” and is subject to limitations. The University is responsible for tracking the use of all property funded with tax-advantaged debt for the duration of the financing. Additionally, the IRS requires that records of the property use and other documentation must be maintained for the life of the financing plus three years. Violations of the permitted use of property financed with tax-advantaged debt in accordance with IRS regulations can result in significant monetary penalties to ASU and other unfavorable consequences.

Policy

Monitoring Private Use

Private use of facilities and equipment financed with tax-advantaged debt is monitored by the Financial Services Debt & Plant Office. To ensure private use stays within legal limitations, it is required that the Financial Services Debt & Plant office be notified of any potential private use of ASU facilities (i.e. use by an entity other than ASU or a local government). Private use agreements meeting certain safe harbors may be exempt from this requirement. Generally, if a use agreement is for less than 50 days and fair market value is charged for use of the space, it may meet the safe harbor. Contact the Financial Services Debt & Plant office at debtcompliance@asu.edu for additional information and alternate processes.

The most important factor in determining use of any ASU space by or for the benefit of a private party is whether the facility was financed in whole or in part by tax-advantaged debt. If debt financing is an issue, it must then be determined if the proposed use constitutes private use in excess of allowable limits. The Financial Services Debt & Plant office retains a listing of all ASU facilities that are financed with tax-advantaged debt and the relative private use capacity that is remaining. The list is found here. Facilities having no tax-advantaged debt are color coded “Green” and, generally, use agreements in these buildings do not require review for purposes of monitoring private use.

For Sponsor funded research, specific procedures have been established between ASU’s Office of Research Administration and Financial Services to monitor potential private use. By university policy, all externally sponsored research is to be handled through the ASU’s Office of Research Administration.

Recordkeeping

A copy of all executed facility use or lease agreements should be sent to the Financial Services, Debt Management office at debtcompliance@asu.edu. The Financial Services Debt & Plant office will file and maintain copies of agreements and other required documentation for the life of the financing plus three years in order to meet the record keeping requirements of the IRS.

Cross-References

A standard facility use agreement form is available on the ASU Office of General Counsel Web site.

A listing of all ASU facilities with tax-advantaged debt financing can be found here.

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