[Federal Register Volume 60, Number 77 (Friday, April 21, 1995)]
[Proposed Rules]
[Pages 19867-19871]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-9946]



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[[Page 19868]]

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[IA-18-95]
RIN 1545-AT33


Lease Term; Exchanges of Tax-Exempt Use Property

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking and notice of public hearing.

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SUMMARY: This document contains proposed regulations relating to the 
lease term of tax-exempt use property. The proposed regulations also 
provide guidance regarding certain like-kind exchanges among related 
parties involving tax-exempt use property. This document also provides 
notice of a public hearing on these regulations.

DATES: Written comments must be received by July 20, 1995. Requests to 
appear and outlines of topics to be discussed at the public hearing 
scheduled for August 2, 1995, must be received by July 12, 1995.

ADDRESSES: Send submissions to: CC:DOM:CORP:T:R (IA-18-95), room 5228, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. In the alternative, submissions may be hand delivered between 
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:T:R (IA-18-95), 
Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., 
Washington, DC. The public hearing will be held in the IRS Auditorium, 
7th Floor, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:
Concerning the proposed regulations, John M. Aramburu of the Office of 
Assistant Chief Counsel (Income Tax and Accounting) at (202) 622-4960; 
concerning submissions and the public hearing, Christian Vasquez, (202) 
622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) relating to the depreciation of tax-exempt 
use property under section 168 of the Internal Revenue Code (Code). 
Section 168(h) provides rules relating to the definition of tax-exempt 
use property. Section 168(i)(3) provides rules for determining a lease 
term for purposes of section 168. These proposed regulations provide 
guidance relating to certain exchanges of tax-exempt use property among 
related parties and the determination of lease term under certain 
circumstances.

Explanation of Provisions

Current Law

    Under section 168, property used in a trade or business, or held 
for the production of income, generally may be depreciated under the 
general depreciation system (GDS) using accelerated methods over 
relatively short recovery periods. However, certain property must be 
depreciated under the alternative depreciation system (ADS) described 
in section 168(g). Under ADS, depreciation deductions are determined 
using the straight-line method over longer recovery periods.
    Under section 168(g)(1)(B), tax-exempt use property is subject to 
ADS. Section 168(h)(1) defines tax-exempt use property to include that 
portion of any tangible property (other than nonresidential real 
property) leased to a tax-exempt entity, as well as nonresidential real 
property, under certain conditions. For these purposes, section 
168(h)(2)(A)(iii) provides that certain foreign entities and persons 
are considered tax-exempt entities. Under ADS, the recovery period of 
tax-exempt use property subject to a lease is no less than 125 percent 
of the lease term. See section 168(g)(3)(A).
    The intent of Congress is subjecting tax-exempt use property to a 
slower depreciation system than GDS is expressed in the legislative 
history as follows:

    The committee believes that reform of the tax law is essential, 
insofar as it relates to property used by tax-exempt entities under 
a lease, a lease formulated as a service contract, or other similar 
arrangements. When tax-exempt entities use property under these 
arrangements, they pay reduced rents that reflect a pass-through of 
investment tax incentives from the owner of the property. Tax-exempt 
entities thereby benefit from investment incentives for which they 
do not qualify directly, and effectively gain the advantage of 
taking income tax deductions and credits while having no 
corresponding liability to pay any tax on income from the property.

S. Rep. No. 169 (Vol. 1), 98th Cong., 2d Sess. 123 (1984).
    Thus, Congress subjected tax-exempt use property to a slower 
depreciation system in order to prevent tax-exempt entities from 
receiving, through reduced rentals, the tax benefits of GDS. Congress 
retained the rules for depreciating tax-exempt use property when it 
modified the accelerated cost recovery system in 1986. S. Rep. No. 313, 
99th Cong., 2d Sess. 103 (1986).
    Section 168(i)(5) provides that when property changes status, for 
example, ceases to be tax-exempt use property, the depreciation 
deduction for the year of change and subsequent taxable years shall be 
determined in such manner as the Secretary shall prescribe by 
regulation. Proposed Sec. 1.168-2(j)(3) sets forth principles for 
depreciating property following a change in its status. Section 
1.168(j)-1T, Q&A 2, which relates to tax-exempt use property, 
references that provision.
    The tax-exempt use property rules contain a number of references to 
lease term. As noted above, the recovery period of tax-exempt use 
property subject to a lease is no less than 125 percent of the lease 
term. In addition, section 168(h)(1)(B)(ii)(III) characterizes as tax-
exempt use property nonresidential real property leased to a tax-exempt 
entity for a term in excess of 20 years, section 168(h)(3)(A) excludes 
from the definition of tax-exempt use property certain high technology 
equipment leased to a tax-exempt entity for a term of no more than five 
years, and section 168(h)(1)(C) excludes property subject to certain 
short-term leases from the tax-exempt use property rules.
    For each of these purposes, the lease term is determined under all 
the facts and circumstances. Further, legislative history states that 
rules ``similar to those applied under section 46(e)(3) (relating to 
investment credits for non-corporate lessors) be applied in determining 
lease term. See. e.g., Hokanson v. Commissioner, 730 F.2d 1245, 1248 
(9th Cir. 1984) (which applies a reasonable expectations test).'' S. 
Rep. No. 169 (Vol. 1), 98th Cong., 2d Sess. 150 (1984). Section 
168(i)(3) provides rules for determining a lease term. It indicates 
that, in determining a lease term, options to renew generally must be 
taken into account and the periods of certain successive leases must be 
aggregated with the period of an original lease.
    Section 1.168(j)-1T, Q&A 17, provides additional rules for 
determining lease term. The regulation sets forth circumstances under 
which a lease term will include not only the stated duration of a lease 
but also an additional period, including options to renew and 
successive leases. It also provides examples of situations in which 
aggregation of lease periods is required, and situations in which lease 
periods are considered sufficiently independent so that aggregation is 
not required.

Lease Term

    The proposed regulations generally clarify the rules for 
determining a lease [[Page 19869]] term in certain situations. They 
require the aggregation of the stated duration of an original lease 
with any additional period for which the original, tax-exempt lessee 
(or a person related to the lessee) retains financial responsibility. 
The proposed regulations are intended to supplement existing 
authorities, including Sec. 1.168(j)-1T, Q&A 17.
    Specifically, the proposed regulations provide that an additional 
period of time during which a lessee may not continue to be the lessee 
is nevertheless included in the lease term if the lessee (or a related 
person) has agreed that one or both of them will or could be obligated 
to make a payment of rent, or a payment in the nature of rent, with 
respect to such period. For purposes of this rule, a payment in the 
nature of rent includes a payment intended to substitute for rent or to 
fund or supplement the rental payments of another. For example, a 
payment in the nature of rent includes a payment of any kind that is 
required to be made in the event that: (1) The leased property is not 
leased for the additional period; (2) the leased property is leased for 
the additional period under terms that do not satisfy specified terms 
and conditions; (3) there is a failure to make a payment of rent with 
respect to such additional period; or (4) similar circumstances occur. 
This rule disregards, however, obligations to make de minimis payments.
    The proposed regulations also provide that in the event an 
additional period is included in the lease term, section 168(i)(5) 
(relating to changes in status) applies if the leased property ceases 
to be tax-exempt use property for such additional period.
    The proposed regulations apply to leases entered into on or after 
the date the proposed regulations are filed with the Federal Register. 
No inference as to the treatment of additional lease periods under 
current law is intended by such effective date. The proposed 
regulations do not preclude the application of common law doctrines 
(such as the substance over form or step transaction doctrines) and 
other authorities to the determination of lease term or to the 
determination of whether a transaction is characterized as a lease, a 
conditional sale, or otherwise for federal income tax purposes.

Like-Kind Exchanges

    The proposed regulations also addresses certain transactions 
between related persons that are designed to circumvent the tax-exempt 
use property rules. For example, a taxpayer might purchase tax-exempt 
use property for $100x and then promptly transfer the property to a 
related person in exchange for like-kind property of an equal value 
that has a zero basis and is not tax-exempt use property (the taxable 
property). If the exchange qualifies for nonrecognition treatment under 
section 1031 as to the related person, the related person recognizes 
none of its gain with respect to the taxable property and takes the 
tax-exempt use property with a zero basis. At the same time, the 
taxpayer has a $100x basis in the taxable property. The desired net tax 
result of the transaction is that a new investment in property that is 
properly subject to the ADS becomes subject to GDS.
    To address this situation, the proposed regulations provide that 
property (tainted property) transferred directly or indirectly to the 
taxpayer by a related person (the related party) as part of, or in 
connection with, a transaction described in section 1031 where the 
related party receives tax-exempt use property (related tax-exempt use 
property) will, if the tainted property is subject to an allowance for 
depreciation, be treated in the same manner as the related tax-exempt 
use property for purposes of determining the allowable depreciation 
deduction under section 167(a). Under this rule, the tainted property 
is depreciated by the taxpayer over the remaining recovery period of, 
and using the same depreciation method and convention as that of, the 
related tax-exempt use property.
    This rule is subject to certain limitations. In general, the rule 
applies only with respect to so much of the taxpayer's basis in the 
tainted property as does not exceed the taxpayer's adjusted basis in 
the related tax-exempt use property prior to the transfer. Any excess 
of the taxpayer's basis in the tainted property over its adjusted basis 
in the related tax-exempt use property prior to the transfer is treated 
as property to which the rule does not apply. Moreover, the rule does 
not apply to so much of the taxpayer's basis in the tainted property as 
is subject to section 168(i)(7).
    The proposed regulations provide that related tax-exempt use 
property includes property that does not become tax-exempt use property 
(as defined in section 168(h)) until after the transfer if, at the time 
of the transfer, it was intended that the property become tax-exempt 
property. Moreover, in the circumstances described in the preceding 
sentence, the related tax-exempt use property will be treated as 
having, prior to the transfer, a lease term equal to the term of any 
lease that causes such property to become tax-exempt use property.
    The proposed regulations only apply with respect to direct or 
indirect transfers of property involving related persons where (1) 
section 1031 applies to any party, and (2) a principal purpose of the 
transfer is to avoid or limit the application of ADS. For purposes of 
this rule, a person is related to another person if they bear a 
relationship specified in section 267(b) or section 707(b)(1).
    The proposed regulations apply to transfers made on or after the 
date the proposed regulations are filed with the Federal Register. No 
inference is intended as to the treatment of transfers intended to 
avoid or limit the application of ADS that are made prior to the 
effective date. In addition, the proposed regulations do not preclude 
the application of common law doctrines (such as the substance over 
form or step transaction doctrines) and other authorities to transfers 
intended to avoid or limit the application of ADS, including transfers 
occurring prior to the effective date of the proposed regulations.
    The IRS and Treasury invite comments on the scope of the proposed 
regulations. For example, comments are requested as to whether any 
transactions should be excepted from the proposed regulations or 
whether other transactions should be included within their scope.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It also has been determined 
that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do 
not apply to these proposed regulations, and, therefore, a Regulatory 
Flexibility Analysis is not required. Pursuant to section 7805(f) of 
the Internal Revenue Code, this notice of proposed rulemaking will be 
submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small businesses.

Comments and Public Hearing

    Before these proposed regulations are adopted as final regulations, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying.
    A public hearing has been scheduled for August 2, 1995, at 10 a.m. 
in the IRS Auditorium, 7th Floor, 1111 [[Page 19870]] Constitution 
Avenue NW., Washington, DC. Because of access restrictions, visitors 
will not be admitted beyond the Internal Revenue Building lobby more 
than 15 minutes before the hearing starts.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing.
    Persons that wish to present oral comments at the hearing must 
submit written comments by July 20, 1995 and submit an outline of the 
topics to be discussed and the time to be devoted to each topic by July 
12, 1995.
    A period of 10 minutes will be allotted to each person for making 
comments.
    An agenda showing the scheduling of the speakers will be prepared 
after the deadline for receiving outlines has passed. Copies of the 
agenda will be available free of charge at the hearing.
Drafting Information.
    The principal author of these proposed regulations is John M. 
Aramburu of the Office of Assistant Chief Counsel (Income Tax and 
Accounting). However, other personnel from the IRS and Treasury 
Department participated in their development.
List of Subjects in 26 CFR Part 1
    Income taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
    Accordingly, 26 CFR part 1 is proposed to be amended as follows:
PART 1--INCOME TAXES
    Paragraph 1. The authority citation for part 1 is amended by adding 
entries in numerical order to read as follows:

    Authority: 26 U.S.C. 7805 * * *
    Section 1.168(h)-1 also issued under 26 U.S.C. 168.
    Section 1.168(i)-2 also issued under 26 U.S.C. 168. * * *

    Par. 2. Sections 1.168(h)-1 and 1.168(i)-2 are added to read as 
follows:
Sec. 1.168(h)-1  Like-kind exchanges involving tax-exempt use property.

    (a) Scope. (1) This section applies with respect to a direct or 
indirect transfer of property among related persons, including 
transfers made through a qualified intermediary (as defined in 
Sec. 1.1031(k)-1(g)(4)) or other unrelated person, (a transfer) if--
    (i) Section 1031 applies to any party to the transfer or to any 
related transaction; and
    (ii) A principal purpose of the transfer or any related transaction 
is to avoid or limit the application of the alternative depreciation 
system (within the meaning of section 168(g)).
    (2) For purposes of this section, a person is related to another 
person if they bear a relationship specified in section 267(b) or 
section 707(b)(1).
    (b) Allowable depreciation deduction for property subject to this 
section--(1) In general. Property (tainted property) transferred 
directly or indirectly to a taxpayer by a related person (related 
party) as part of, or in connection with, a transaction in which the 
related party receives tax-exempt use property (related tax-exempt use 
property) will, if the tainted property is subject to an allowance for 
depreciation, be treated in the same manner as the related tax-exempt 
use property for purposes of determining the allowable depreciation 
deduction under section 167(a). Under this paragraph (b), the tainted 
property is depreciated by the taxpayer over the remaining recovery 
period of, and using the same depreciation method and convention as 
that of, the related tax-exempt use property.
    (2) Limitations--(i) Taxpayer's basis in related tax-exempt use 
property. This section applies only with respect to so much of the 
taxpayer's basis in the tainted property as does not exceed the 
taxpayer's adjusted basis in the related tax-exempt use property prior 
to the transfer. Any excess of the taxpayer's basis in the tainted 
property over its adjusted basis in the related tax-exempt use property 
prior to the transfer is treated as property to which this section does 
not apply. This paragraph (b)(2)(i) does not apply if the related tax-
exempt use property is not acquired from the taxpayer (e.g., if the 
taxpayer acquires the tainted property for cash but section 1031 
nevertheless applies to the related party because the transfer involves 
a qualified intermediary).
    (ii) Application of section 168(i)(7). This section does not apply 
to so much of the taxpayer's basis in the tainted property as is 
subject to section 168(i)(7).
    (c) Related tax-exempt use property. (1) For purposes of paragraph 
(b) of this section, related tax-exempt use property includes--
    (i) Property that is tax-exempt use property (as defined in section 
168(h)) at the time of the transfer; and
    (ii) Property that does not become tax-exempt use property until 
after the transfer if, at the time of the transfer, it was intended 
that the property become tax-exempt use property.
    (2) For purposes of determining the remaining recovery period of 
the related tax-exempt use property in the circumstances described in 
paragraph (c)(1)(ii) of this section, the related tax-exempt use 
property will be treated as having, prior to the transfer, a lease term 
equal to the term of any lease that causes such property to become tax-
exempt use property.
    (d) Examples. The following examples illustrate the application of 
this section. The examples do not address common law doctrines or other 
authorities that may apply to recharacterize or alter the effects of 
the transactions described therein. Unless otherwise indicated, parties 
to the transactions are not related to one another.

    Example 1. (i) X owns all of the stock of two subsidiaries, B 
and Z. X, B and Z do not file a consolidated federal income tax 
return. On May 5, 1995, B purchases an aircraft (FA) for $1 million 
and leases it to a foreign airline whose income is not subject to 
United States taxation and which is a tax-exempt entity as defined 
in section 168(h)(2). On the same date, Z owns an aircraft (DA) with 
a fair market value of $1 million, which has been, and continues to 
be, leased to an airline that is a United States taxpayer. Z's 
adjusted basis in DA is $0. The next day, at a time when each 
aircraft is still worth $1 million, B transfers FA to Z (subject to 
the lease to the foreign airline) in exchange for DA (subject to the 
lease to the airline that is a United States taxpayer). Z realizes 
gain of $1 million on the exchange, but that gain is not recognized 
pursuant to section 1031(a) because the exchange is of like-kind 
properties. Assume that a principal purpose of the transfer of DA to 
B or of FA to Z is to avoid the application of the alternative 
depreciation system. Following the exchange, Z has a $0 basis in FA 
pursuant to section 1031(d). B has a $1 million basis in DA.
    (ii) B has acquired property from Z, a related person; Z's gain 
is not recognized pursuant to section 1031(a); Z has received tax-
exempt use property as part of the transaction; and a principal 
purpose of the transfer of DA to B or of FA to Z is to avoid the 
application of the alternative depreciation system. Accordingly, the 
transaction is within the scope of this section. Pursuant to 
paragraph (b) of this section, B must recover its $1 million basis 
in DA over the remaining recovery period of, and using the same 
depreciation method and convention as that of, FA, the related tax-
exempt use property.
    (iii) If FA did not become tax-exempt use property until after 
the exchange, it would still be related tax-exempt use property and 
paragraph (b) of this section would apply if, at the time of the 
exchange, it was intended that FA become tax-exempt use property.
    Example 2. (i) X owns all of the stock of two subsidiaries, B 
and Z. X, B and Z do not file a consolidated federal income tax 
return. B and Z each own identical aircraft. B's aircraft (FA) is 
leased to a tax-exempt entity as defined in section 168(h)(2) and 
has a fair market value of $1 million and an adjusted basis of 
$500,000. Z's aircraft (DA) is leased to a United States taxpayer 
and has a fair market value of $1 million and an adjusted basis of 
$10,000. On May 1, 1995, B and Z exchange aircraft, subject to their 
respective leases. B realizes gain of $500,000 and Z realizes gain 
of $990,000, but neither person recognizes gain because of the 
operation of [[Page 19871]] section 1031(a). Moreover, assume that a 
principal purpose of the transfer of DA to B or of FA to Z is to 
avoid the application of the alternative depreciation system.
    (ii) As in example 1, B has acquired property from Z, a related 
person; Z's gain is not recognized pursuant to section 1031(a); Z 
has received tax-exempt use property as part of the transaction; and 
a principal purpose of the transfer of DA to B or of FA to Z is to 
avoid the application of the alternative depreciation system. Thus, 
the transaction is within the scope of this section even though B 
has held tax-exempt use property for a period of time and, during 
that time, has used the alternative depreciation system with respect 
to such property. Pursuant to paragraph (b) of this section, B, 
which has a substituted basis determined pursuant to section 1031(d) 
of $500,000 in DA, must depreciate the aircraft over the remaining 
recovery period of FA, using the same depreciation method and 
convention. Z holds tax-exempt use property with a basis of $10,000, 
which must be depreciated under the alternative depreciation system.
    (iii) Assume the same facts as in paragraph (i) of this example, 
except that B and Z are members of an affiliated group that files a 
consolidated federal income tax return. Of B's $500,000 basis in DA, 
$10,000 is subject to section 168(i)(7) and therefore not subject to 
this section. The remaining $490,000 of basis is subject to this 
section.

    (e) Effective date. This section applies to transfers made on or 
after April 20, 1995.


Sec. 1.168(i)-2  Lease term.

    (a) In general. For purposes of section 168, a lease term is 
determined under all the facts and circumstances. Paragraph (b) of this 
section and Sec. 1.168(j)-1T, Q&A 17, provide rules that apply to 
determine whether a period of time not included in the stated duration 
of an original lease (additional period) is included in the lease term, 
under certain circumstances. These rules do not prevent the inclusion 
of an additional period in the lease term in other circumstances.
    (b) Lessee retains financial obligation. (1) An additional period 
of time during which a lessee may not continue to be the lessee will 
nevertheless be included in the lease term if the lessee (or a related 
person) has agreed that one or both of them will or could be obligated 
to make a payment of rent or a payment in the nature of rent with 
respect to such period.
    (2) For the purposes of this paragraph (b), a payment in the nature 
of rent includes a payment intended to substitute for rent or to fund 
or supplement the rental payments of another. For example, a payment in 
the nature of rent includes a payment of any kind that is required to 
be made in the event that--
    (i) The leased property is not leased for the additional period;
    (ii) The leased property is leased for the additional period under 
terms that do not satisfy specified terms and conditions;
    (iii) There is a failure to make a payment of rent with respect to 
such additional period; or
    (iv) Circumstances similar to those described in paragraph 
(b)(2)(i), (ii), or (iii) occur.
    (3) For the purposes of this paragraph (b), de minimis payments 
will be disregarded.
    (c) Related person. For purposes of paragraph (b) of this section, 
a person is related to the lessee if such person is described in 
section 168(h)(4).
    (d) Changes in status. Section 168(i)(5) (changes in status) 
applies if an additional period is included in a lease term under this 
section and the leased property ceases to be tax-exempt use property 
for such additional period.
    (e) Example. The following example illustrates the application of 
this section. The example does not address common law doctrines or 
other authorities that may apply to cause an additional period to be 
included in the lease term or to recharacterize a lease as a 
conditional sale or otherwise for federal income tax purposes. Unless 
otherwise indicated, parties to the transactions are not related to one 
another.

    Example. Financial obligation with respect to an additional 
period.--(i) Facts. X, a taxable corporation, and Y, a foreign 
airline whose income is not subject to United States taxation, enter 
into a lease agreement under which X agrees to lease an aircraft to 
Y for a period of 10 years. The lease agreement provides that, at 
the end of the lease period, Y is obligated to find a subsequent 
lessee (replacement lessee) to enter into a subsequent lease 
(replacement lease) of the aircraft from X for an additional 10-year 
period. The provisions of the lease agreement require that any 
replacement lessee be unrelated to Y and that it not be a tax-exempt 
entity as defined in section 168(h)(2). The provisions of the lease 
agreement also set forth the basic terms and conditions of the 
replacement lease, including its duration and the required rental 
payments. In the event Y fails to secure a replacement lease, the 
lease agreement requires Y to make a payment to X in an amount 
determined under the lease agreement.
    (ii) Application of this section. The lease agreement between X 
and Y obligates Y to make a payment in the event the aircraft is not 
leased for the period commencing after the initial 10-year lease 
period and ending on the date the replacement lease is scheduled to 
end. Accordingly, pursuant to paragraph (b) of this section, the 
term of the lease between X and Y includes such additional period, 
and the lease term is 20 years for purposes of section 168.
    (ii) Facts modified. Assume the same facts as in paragraph (i) 
of this example, except that Y is required to guarantee the payment 
of rentals under the 10-year replacement lease and to make a payment 
to X equal to the present value of any excess of the replacement 
lease rental payments specified in the lease agreement between X and 
Y, over the rental payments actually agreed to be paid by the 
replacement lessee. Pursuant to paragraph (b) of this section, the 
term of the lease between X and Y includes the additional period, 
and the lease term is 20 years for purposes of section 168.
    (iv) Changes in status. If, upon the conclusion of the stated 
duration of the lease between X and Y, the aircraft either is 
returned to X or leased to a replacement lessee that is not a tax-
exempt entity as defined in section 168(h)(2), the subsequent method 
of depreciation will be determined pursuant to section 168(i)(5).

    (f) Effective date. This section applies to leases entered into on 
or after April 20, 1995.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 95-9946 Filed 4-20-95; 8:45 am]
BILLING CODE 4830-01-M