DOWNTOWN BROOKLYN - Updated tax rules issued Tuesday limit the way tax-exempt bonds can be used to pay for sports facilities but don't block the New Jersey Nets from using billions of dollars in bonds to help pay for their new home, state and city officials said.

The Nets' owner, Bruce Ratner, had considered the tax ruling crucial to plans for a new arena in Downtown Brooklyn, the centerpiece of the Atlantic Yards development. Ratner has said he wants to pay for the $950 million arena by raising up to $800 million in tax-exempt bonds.

With a new basketball arena for the Nets nowhere to be seen in Downtown Brooklyn, the new regulation issued by the Internal Revenue Service is a big boost for Ratner and his long-delayed project.

A spokesperson for Ratner's company, Forest City Ratner, said "the regulation will help us move forward with a project that is critical to the ongoing economic vitality of Brooklyn and the city."

However, the plan has attracted much opposition.

"It means we're giving tax breaks to a billionaire at a time of a historic bailout and an economic crisis," said Daniel Goldstein, of Develop Don't Destroy Brooklyn.

Goldstein said the group plans to wait and see if Ratner will take advantage of the new regulation - which he is expected to do - before it considers every option to stop the project from moving forward.

The IRS limited the way tax-exempt bonds could be used in the future but said the rules would not apply to "certain projects substantially in progress," including those with preliminary government approval and with significant expenses.

The owners of the Yankees and Mets are also expected to benefit from the tax-exempt bonds by using them to pay for their new stadiums.