An electric and gas utility can demolish tax-exempt bond-financed pollution control facilities that are no longer in compliance with environmental standards without jeopardizing the tax status of the bonds, the Internal Revenue Service concluded in a recent private-letter ruling.

"Demolition ... precludes any further use of the project facilities by causing them to change from what is currently an unexpected, non-functional use to no use at all except potentially as scrap materials for recycling," the IRS stated in the ruling, which was dated April 7 but not publicly released until yesterday. "This is not a change of use within the meaning of" the tax code, the agency said.

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