officer
(3) Election to cease status as qualified scholarship funding corporation (A) In general Any qualified scholarship funding bond, and qualified student loan bond, outstanding on the date of the issuer’s election under this paragraph (and any bond (or series of bonds) issued to refund such a bond) shall not fail to be a tax-exempt bond solely because the issuer ceases to be described in subparagraphs (A) and (B) of paragraph (2) if the issuer meets the requirements of subparagraphs (B) and (C) of this paragraph. (B) Assets and liabilities of issuer transferred to taxable subsidiary The requirements of this subparagraph are met by an issuer if— (i) all of the student loan notes of the issuer and other assets pledged to secure the repayment of qualified scholarship funding bond indebtedness of the issuer are transferred to another corporation within a reasonable period after the election is made under this paragraph; (ii) such transferee corporation assumes or otherwise provides for the payment of all of the qualified scholarship funding bond indebtedness of the issuer within a reasonable period after the election is made under this paragraph; (iii) to the extent permitted by law, such transferee corporation assumes all of the responsibilities, and succeeds to all of the rights, of the issuer under the issuer’s agreements with the Secretary of Education in respect of student loans; (iv) immediately after such transfer, the issuer, together with any other issuer which has made an election under this paragraph in respect of such transferee, hold all of the senior stock in such transferee corporation; and (v) such transferee corporation is not exempt from tax under this chapter. (C) Issuer to operate as independent organization described in section 501(c)(3) The requirements of this subparagraph are met by an issuer if, within a reasonable period after the transfer referred to in subparagraph (B)— (i) the issuer is described in section 501(c)(3) and exempt from tax under section 501(a); (ii) the issuer no longer is described in subparagraphs (A) and (B) of paragraph (2); and (iii) at least 80 percent of the members of the board of directors of the issuer are independent members. (D) Senior stock For purposes of this paragraph, the term “senior stock” means stock— (i) which participates pro rata and fully in the equity value of the corporation with all other common stock of the corporation but which has the right to payment of liquidation proceeds prior to payment of liquidation proceeds in respect of other common stock of the corporation; (ii) which has a fixed right upon liquidation and upon redemption to an amount equal to the greater of— (I) the fair market value of such stock on the date of liquidation or redemption (whichever is applicable); or (II) the fair market value of all assets transferred in exchange for such stock and reduced by the amount of all liabilities of the corporation which has made an election under this paragraph assumed by the transferee corporation in such transfer; (iii) the holder of which has the right to require the transferee corporation to redeem on a date that is not later than 10 years after the date on which an election under this paragraph was made and pursuant to such election such stock was issued; and (iv) in respect of which, during the time such stock is outstanding, there is not outstanding any equity interest in the corporation having any liquidation, redemption or dividend rights in the corporation which are superior to those of such stock. (E) Independent member The term “independent member” means a member of the board of directors of the issuer who (except for services as a member of such board) receives no compensation directly or indirectly— (i) for services performed in connection with such transferee corporation, or (ii) for services as a member of the board of directors or as an officer of such transferee corporation. For purposes of clause (ii), the term “officer” includes any individual having powers or responsibilities similar to those of officers. (F) Coordination with certain private foundation taxes For purposes of sections 4942 (relating to the excise tax on a failure to distribute income) and 4943 (relating to the excise tax on excess business holdings), the transferee corporation referred to in subparagraph (B) shall be treated as a functionally related business (within the meaning of section 4942(j)(4)) with respect to the issuer during the period commencing with the date on which an election is made under this paragraph and ending on the date that is the earlier of— (i) the last day of the last taxable year for which more than 50 percent of the gross income of such transferee corporation is derived from, or more than 50 percent of the assets (by value) of such transferee corporation consists of, student loan notes incurred under the Higher Education Act of 1965; or (ii) the last day of the taxable year of the issuer during which occurs the date which is 10 years after the date on which the election under this paragraph is made. (G) Election An election under this paragraph may be revoked only with the consent of the Secretary.