This bill amends the Internal Revenue Code, with respect to the requirements for tax-exempt bonds, to reinstate the exclusion from gross income for interest on certain bonds issued to advance refund another bond. The exclusion was repealed for bonds issued after 2017.
(A refunding bond is a bond used to pay principal, interest, or the redemption price on a prior bond issue. An advance refunding bond is issued more than 90 days before the redemption of the refunded bond.)
[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5003 Introduced in House (IH)]
<DOC>
115th CONGRESS
2d Session
H. R. 5003
To amend the Internal Revenue Code of 1986 to reinstate advance
refunding bonds.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 13, 2018
Mr. Hultgren (for himself, Mr. Ruppersberger, Mr. Messer, Mr. Royce of
California, Mr. Kildee, and Mr. Capuano) introduced the following bill;
which was referred to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to reinstate advance
refunding bonds.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. TREATMENT OF ADVANCE REFUNDING BONDS.
(a) In General.--Section 149(d) of the Internal Revenue Code of
1986 is amended--
(1) in paragraph (1), by striking ``to advance refund
another bond'' and inserting ``as part of an issue described in
paragraph (2), (3), or (4)'';
(2) by redesignating paragraphs (2) and (3) as paragraphs
(6) and (7), respectively; and
(3) by inserting after paragraph (1) the following new
paragraphs:
``(2) Certain private activity bonds.--An issue is
described in this paragraph if any bond (issued as part of such
issue) is issued to advance refund a private activity bond
(other than a qualified 501(c)(3) bond).
``(3) Other bonds.--
``(A) In general.--An issue is described in this
paragraph if any bond (issued as part of such issue),
hereinafter in this paragraph referred to as the
`refunding bond', is issued to advance refund a bond
unless--
``(i) the refunding bond is only--
``(I) the 1st advance refunding of
the original bond if the original bond
is issued after 1985, or
``(II) the 1st or 2nd advance
refunding of the original bond if the
original bond was issued before 1986,
``(ii) in the case of refunded bonds issued
before 1986, the refunded bond is redeemed not
later than the earliest date on which such bond
may be redeemed at par or at a premium of 3
percent or less,
``(iii) in the case of refunded bonds
issued after 1985, the refunded bond is
redeemed not later than the earliest date on
which such bond may be redeemed,
``(iv) the initial temporary period under
section 148(c) ends--
``(I) with respect to the proceeds
of the refunding bond not later than 30
days after the date of issue of such
bond, and
``(II) with respect to the proceeds
of the refunded bond on the date of
issue of the refunding bond, and
``(v) in the case of refunded bonds to
which section 148(e) did not apply, on and
after the date of issue of the refunding bond,
the amount of proceeds of the refunded bond
invested in higher yielding investments (as
defined in section 148(b)) which are nonpurpose
investments (as defined in section
148(f)(6)(A)) does not exceed--
``(I) the amount so invested as
part of a reasonably required reserve
or replacement fund or during an
allowable temporary period, and
``(II) the amount which is equal to
the lesser of 5 percent of the proceeds
of the issue of which the refunded bond
is a part or $100,000 (to the extent
such amount is allocable to the
refunded bond).
``(B) Special rules for redemptions.--
``(i) Issuer must redeem only if debt
service savings.--Clause (ii) and (iii) of
subparagraph (A) shall apply only if the issuer
may realize present value debt service savings
(determined without regard to administrative
expenses) in connection with the issue of which
the refunding bond is a part.
``(ii) Redemptions not required before 90th
day.--For purposes of clauses (ii) and (iii) of
subparagraph (A), the earliest date referred to
in such clauses shall not be earlier than the
90th day after the date of issuance of the
refunding bond.
``(4) Abusive transactions prohibited.--An issue is
described in this paragraph if any bond (issued as part of such
issue) is issued to advance refund another bond and a device is
employed in connection with the issuance of such issue to
obtain a material financial advantage (based on arbitrage)
apart from savings attributable to lower interest rates.
``(5) Special rules for purposes of paragraph (3).--For
purposes of paragraph (3), bonds issued before the date of the
enactment of this subsection shall be taken into account under
subparagraph (A)(i) thereof except--
``(A) a refunding which occurred before 1986 shall
be treated as an advance refunding only if the
refunding bond was issued more than 180 days before the
redemption of the refunded bond, and
``(B) a bond issued before 1986, shall be treated
as advance refunded no more than once before March 15,
1986.''.
(b) Conforming Amendment.--Section 148(f)(4)(C) of such Code is
amended by redesignating clauses (xiv) through (xvi) as clauses (xv)
through (xvii) and by inserting after clause (xiii) the following new
clause:
``(xiv) Determination of initial temporary
period.--For purposes of this subparagraph, the
end of the initial temporary period shall be
determined without regard to section
149(d)(3)(A)(iv).''.
(c) Effective Date.--The amendments made by this section shall
apply to advance refunding bonds issued after the date of the enactment
of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
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