On April 9, 2012, the American Bar Association’s Tax Section submitted comments to the IRS on the scope of Section 514, the debt-financed income rules.  Although Section 512(b) generally provides that income from a charity’s passive investments is not subject to tax, to the extent the investments constitute debt-financed property (property which is held to produce income and with respect to which there is an acquisition indebtedness), such income is subject to the tax on unrelated business income.   Issues arise when an exempt organization borrows to fund its charitable program expenses, exempt activities, and related administrative expenses, while at the same time, on its behalf, its investment advisers are buying and selling investments that produce passive investment income.  As described in the comments, the IRS has in the past expressed informal concern that a borrowing to fund exempt activities is “acquisition indebtedness” attributable to investment assets when the debt, even though motivated by