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Effective: 7/1/2005
Revised: 1/19/2006
FIN 126: Private Use of University Facilities
Purpose
To ensure appropriate use of university facilities and equipment that may be tax-exempt financed
Sources
Internal Revenue Service regulations
University policy
Background
Facilities and equipment owned by the university may occasionally be made available for use by
or for the benefit of other parties. While these arrangements are often mutually beneficial, there
are certain situations in which this practice can present serious tax problems for the institution.
Policy
Private use of facilities and equipment (henceforth, referred to as facilities) financed with taxexempt bonds require monitoring procedures to insure that the private use stays within legal
limitations. Excessive private use may require refinancing of a debt issuance, and for this reason,
private use of ASU facilities requires the review and approval of the associate vice president for
finance and treasurer.
The approval by the Associate Vice President for Finance and Treasurer is only to determine that
a refinancing of a facility from tax exempt to taxable interest rate debt is not needed in order to
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enter into the private use arrangement. This approval may not be the only approval needed and
does not substitute for any other needed approvals.
Violations of the permitted use of facilities tax exempt financed in accordance with IRS
regulations can result in significant monetary penalties to ASU and it is for this reason that this
policy exists.
In addition, revenue from the private use of university facilities is subject to sales tax (FIN: 108),
which should be added to the lease or rental payments received from the private user of the
space. Financial Services is to be contacted for the procedures to be followed for the handling of
the sales tax collections and payments.
Procedures
Requests to use university facilities that are tax exempt financed must be submitted to the
associate vice president for finance and treasurer for review and approval under the following
conditions:
1. use of an ASU facility by one or more ASU employees to operate a trade or business not
owned or operated by the university
or
2. use of any facility by individuals not employed by the university or by non university
ASU and non governmental organizations (private parties)
or
3. use of space for research sponsored by private parties in which the sponsor obtains rights
to any resulting technology or other intellectual property.
Exempted from the requirement to submit to the Associate Vice President for Finance and
Treasurer for review and approval are rental and facility use arrangements that meet the
following stipulations:

The university facility use or rental arrangement with an external (non-ASU) party is for
no more than 50 days of total use, e.g., every Saturday and Sunday for 15 weeks, totaling
30 days of use. The no more than 50 days of use does not need to be consecutive days;
and

Fair market value is charged for use of the space. To determine whether fair market
value is being charged for use of the space, each ASU department handling a facility use
negotiation is to consult with the chief business or financial person of their college or
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vice presidential area, who, in turn, may need to consult with the ASU Real Estate
Development Department, (480) 965-6700.
There may be a provision in the rental or use agreement to automatically renew for additional
periods of 50 days or less of total use as long as either party has the right to not renew.
For facility use arrangements contemplated to potentially be more than 50 days of total use, it is
preferable that the contractual arrangement be for no more than 50 days at a time, subject to
renewal if agreed to by both parties, so that potential disqualifying use for tax exempt financing
is not triggered.
This policy only applies to facility use by non ASU parties in an ASU facility that is tax exempt
financed. A listing of facilities that are tax exempt financed is contained on the Financial
Services web page (Insert Link).
For research sponsored by private (non government) parties, if the sponsor obtains rights to any
resulting technology or other intellectual property, non qualifying use for a tax exempt facility
could be triggered. Specific procedures have been established between ASU’s Offices of
Research & Sponsored Projects and Financial Services to monitor this type of use. By university
policy, all externally sponsored research is to be handled through the ASU Office of Research &
Sponsored Projects.
Requests for use of university facilities will be evaluated on a case-by-case basis. The following
are among the factors to be considered in making approval or non-approval decisions.
How the Facility was Financed
The most important factor in approving 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-exempt 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 applicable tax regulations are quite complex, as are the financing
arrangements for many ASU facilities. Use of university space in violation of applicable tax
rules and bond covenants can have very unfavorable consequences to the institution.
How the Use Advances University Research, Education, or Public Service Efforts
If the use of the space or equipment by a private party is to advance one or more projects
conducted by the university, approval is more likely. There must be a direct benefit of the use of
the particular space to a specific, clearly identifiable objective of the university.
Duration and Scope of the Use
Private use of a facility on a long-term or permanent basis may not be permitted due to legal
restrictions imposed by the tax-exempt financing of the facility. Use of space or a piece of
equipment by a member of the general public on a “first come, first served” basis will generally
be more likely to be approved as not creating a problem with any existing tax-exempt financing
of the facility.
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If a request is approved, use of the facility by or for the benefit of a private party may not
commence or continue until a written contract is signed by the private party and a duly
authorized representative of the university.
Submission of Request for Facility Use Needing Associate Vice President for Finance and
Treasurer’s Approval.
When submitting request for private facility use, the following is needed:
1. Copy of the draft facility use or proposed rental agreement.
2. Building and room numbers being leased or rented.
3. Square footage of the space being leased or rented.
Summary Determination Check List
1. Is the private (non ASU) use in an ASU
facility that is tax exempt financed (See
(Insert Link)?
___Yes (Go to Step 2)
___No (No further
review needed)
2. Is the facility use for research sponsored
by private (non government) parties?
___Yes (Research must be
handled by ASU’s Office
of Research & Sponsored
Projects)
___No (Go to Step 3)
3. Is the facility use or rental arrangement
with an external (non ASU) party for no
more than 50 days of total use, and is fair
market value being charged for the use?
The no more than 50 days of use does not
need to be consecutive days. Also, the
agreement can be automatically renewable
for additional periods of 50 days or less as
long as either party has right to not renew.
___Yes (No further review
needed)
___No (Agreement
must be submitted to
Associate Vice
President for Finance
& Treasurer for
review and analysis)
Cross-Reference
For information on contract authority, see PUR 202, “Contract Signature Authority.”
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