Rev. Rul. 82-56

FACTS

A municipal public housing authority was created under state statute for the purpose of providing low-income housing projects. The authority is a "public housing agency" within the meaning of the United States Housing Act of 1937, section 3(6), 42 U.S.C. section 1437a(6) (1976). The authority proposes to issue bonds to finance the construction of a low-income housing project approved by the Department of Housing and Urban Development under 42 U.S.C. section 1437f and applicable regulations. The bonds will be used in connection with a low-income housing project described in 42 U.S.C. section 1437i(a) and will comply with all requirements set forth in 24 C.F.R. Part 811 (1981). The principal of and interest on the bonds will be payable only from lease revenues to be received from the tenants of the housing project and from annual contributions to be received from the United States Department of Housing and Urban Development.

Section 1437i(b) of the title 42 U.S.C. provides, in general, that obligations, including interest thereon, issued by public housing agencies in connection with low-income housing projects shall be exempt from federal taxation.

HOLDING

Interest paid on the bonds issued by the municipal public housing authority that are exempt from federal income taxation under 42 U.S.C. section 1437i(b) is excludable from the gross income of the bondholders without regard to the provisions of section 103 of the Internal Revenue Code. See also Rev. Rul. 76-202, 1976-1 C.B. 26, Rev. Rul. 71-402, 1971-2 C.B. 91, and Rev. Rul. 70-219, 1970-1 C.B. 23, which hold that interest paid on bonds that are tax-exempt under certain other provisions of law are excludable from the gross income of the bondholders without regard to the provisions of section 103.

EFFECT ON OTHER REVENUE RULINGS

Rev. Rul. 60-248, 1960-2 C.B. 35, holds that the interest on bonds issued by the New York State Housing Authority to finance construction of low-rent housing is exempt under section 103 of the Code. Although not stated in Rev. Rul. 60-248, the Authority in that revenue ruling is a public housing agency within the meaning of 42 U.S.C. section 1437a(6). Therefore, Rev. Rul. 60-248 is modified to hold that interest paid on bonds issued by the Authority that are exempt from federal taxation under 42 U.S.C. section 1437i(b) is excludable from the gross income of the bondholders without regard to the provisions of section 103.