[Code of Federal Regulations]
[Title 26, Volume 2]
[Revised as of April 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.148-11]
[Page 715-717]
TITLE 26--INTERNAL REVENUE
CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY
(CONTINUED)
PART 1--INCOME TAXES--Table of Contents
Sec. 1.148-11 Effective dates.
(a) In general. Except as otherwise provided in this section,
Secs. 1.148-1 through 1.148-11 apply to bonds sold on or after July 8,
1997.
(b) Elective retroactive application in whole--(1) In general.
Except as otherwise provided in this section, and subject to the
applicable effective dates for the corresponding statutory provisions,
an issuer may apply the provisions of Secs. 1.148-1 through 1.148-11 in
whole, but not in part, to any issue that is outstanding on July 8,
1997, and is subject to section 148(f) or to sections 103(c)(6) or
103A(i) of the Internal Revenue Code of 1954, in lieu of otherwise
applicable regulations under those sections.
(2) No elective retroactive application for 18-month spending
exception. The provisions of Sec. 1.148-7(d) (relating to the 18-month
spending exception) may not be applied to any issue issued on or before
June 30, 1993.
[[Page 716]]
(3) No elective retroactive application for hedges of fixed rate
issues. The provisions of Sec. 1.148-4(h)(2)(i)(B) (relating to hedges
of fixed rate issues) may not be applied to any bond sold on or before
July 8, 1997.
(4) No elective retroactive application for safe harbor for
establishing fair market value for guaranteed investment contracts and
investments purchased for a yield restricted defeasance escrow. The
provisions of Secs. 1.148-5(d)(6)(iii) (relating to the safe harbor for
establishing fair market value of guaranteed investment contracts and
yield restricted defeasance escrow investments) and 1.148-5(e)(2)(iv)
(relating to a special rule for yield restricted defeasance escrow
investments) may not be applied to any bond sold before December 30,
1998.
(c) Elective retroactive application of certain provisions and
special rules--(1) Retroactive application of overpayment recovery
provisions. An issuer may apply the provisions of Sec. 1.148-3(i) to any
issue that is subject to section 148(f) or to sections 103(c)(6) or
103A(i) of the Internal Revenue Code of 1954.
(2) Certain allocations of multipurpose issues. An allocation of
bonds to a refunding purpose under Sec. 1.148-9(h) may be adjusted as
necessary to reflect allocations made between May 18, 1992, and August
15, 1993, if the allocations satisfied the corresponding prior provision
of Sec. 1.148-11(j)(4) under applicable prior regulations.
(3) Special limitation. The provisions of Sec. 1.148-9 apply to
issues issued before August 15, 1993, only if the issuer in good faith
estimates the present value savings, if any, associated with the effect
of the application of that section on refunding escrows, using any
reasonable accounting method, and applies those savings, if any, to
redeem outstanding tax-exempt bonds of the applicable issue at the
earliest possible date on which those bonds may be redeemed or otherwise
retired. These savings are not reduced to take into account any
administrative costs associated with applying these provisions
retroactively.
(d) Transition rule excepting certain state guarantee funds from the
definition of replacement proceeds--(1) Certain perpetual trust funds. A
guarantee by a fund created and controlled by a State and established
pursuant to its constitution does not cause the amounts in the fund to
be pledged funds treated as replacement proceeds if--
(i) Substantially all of the corpus of the fund consists of
nonfinancial assets, revenues derived from these assets, gifts, and
bequests;
(ii) The corpus of the guarantee fund may be invaded only to support
specifically designated essential governmental functions (designated
functions) carried on by political subdivisions with general taxing
powers;
(iii) Substantially all of the available income of the fund is
required to be applied annually to support designated functions;
(iv) The issue guaranteed consists of general obligations that are
not private activity bonds substantially all of the proceeds of which
are to be used for designated functions;
(v) The fund satisfied each of the requirements of paragraphs
(d)(1)(i) through (d)(1)(iii) of this section on August 16, 1986; and
(vi) The guarantee is not attributable to a deposit to the fund made
after May 14, 1989, unless--
(A) The deposit is attributable to the sale or other disposition of
fund assets; or
(B) Prior to the deposit, the outstanding amount of the bonds
guaranteed by the fund did not exceed 250 percent of the lower of the
cost or fair market value of the fund.
(2) Permanent University Fund. Replacement proceeds do not include
amounts allocable to investments of the fund described in section 648 of
Public Law 98-369.
(e) Transition rule regarding special allowance payments. Section
1.148-5(b)(5) applies to any bond issued after January 5, 1990, except a
bond issued exclusively to refund a bond issued before January 6, 1990,
if the amount of the refunding bond does not exceed 101 percent of the
amount of the refunded bond, and the maturity date of the refunding bond
is not later than the date that is 17 years after the date on which the
refunded bond was issued (or, in the case of a series of refundings, the
date on which the original bond was issued), but only if Sec. 1.148-
2(d)(2)(iv) is applied
[[Page 717]]
by substituting 1 and one-half percentage points for 2 percentage
points.
(f) Transition rule regarding applicability of yield reduction rule.
Section 1.148-5(c) applies to nonpurpose investments allocable to
replacement proceeds of an issue that are held in a reserve or
replacement fund to the extent that--
(1) Amounts must be paid into the fund under a constitutional
provision, statute, or ordinance adopted before May 3, 1978;
(2) Under that provision, amounts paid into the fund (and investment
earnings thereon) can be used only to pay debt service on the issues;
and
(3) The size of the payments made into the fund is independent of
the size of the outstanding issues or the debt service thereon.
(g) Provisions applicable to certain bonds sold before effective
date. Except for bonds to which paragraph (b)(1) of this section
applies--
(1) Section 1.148-11A provides rules applicable to bonds sold after
June 6, 1994, and before July 8, 1997; and
(2) Sections 1.148-1 through 1.148-11 as in effect on July 1, 1993
(see 26 CFR part 1 as revised April 1, 1994), and Sec. 1.148-11A(i)
(relating to elective retroactive application of certain provisions)
provide rules applicable to certain issues issued before June 7, 1994.
(h) Safe harbor for establishing fair market value for guaranteed
investment contracts and investments purchased for a yield restricted
defeasance escrow. The provisions of Sec. 1.148-5(d)(6)(iii) are
applicable to bonds sold on or after March 1, 1999. Issuers may apply
these provisions to bonds sold on or after December 30, 1998, and before
March 1, 1999.
(i) Special rule for investments purchased for a yield restricted
defeasance escrow. The provisions of Sec. 1.148-5(e)(2)(iv) are
applicable to bonds sold on or after March 1, 1999. Issuers may apply
these provisions to bonds sold on or after December 30, 1998, and before
March 1, 1999.
[T.D. 8476, 58 FR 33547, June 18, 1993; 58 FR 44453, Aug. 23, 1993, as
amended by T.D. 8538, 59 FR 24046, May 10, 1994; T.D. 8718, 62 FR 25512,
May 9, 1997; T.D. 8476, 64 FR 37037, July 9, 1999]