IRS CORRECTS ERRORS IN ARBITRAGE REBATE REGS.

ACTION: Correction to final and temporary regulations.

SUMMARY: This document contains corrections to Treasury Decision 8418, which was published in the Federal Register for Monday, May 18, 1992 (57 FR 20971). The final and temporary regulations relate to the arbitrage rebate requirements applicable to tax-exempt bond issued by States and local governments under section 103 of the Internal Revenue Code.

EFFECTIVE DATE: May 18, 1992.

FOR FURTHER INFORMATION CONTACT: William P. Cejudo (202) 622- 7750 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

BACKGROUND

The final and temporary regulations that are the subject of these corrections provide rules under section 148 concerning the use of proceeds of state and local bonds to acquire higher yielding investments.

NEED FOR CORRECTION

As published, T.D. 8418 contains errors which may prove to be misleading and are in need of clarification.

CORRECTION OF PUBLICATION

Accordingly, the publication of final and temporary regulations (T.D. 8418), which was the subject of FR Doc. 92-11321, is corrected as follows:

1. On page 20971, column 1, in the preamble under the heading "PAPERWORK REDUCTION ACT", last line of that column the language "1545-1303." is corrected to read "1545-1301. All of these paperwork requirements will be consolidated under control number 1545-1098.".

2. On page 20973, column 2, in the preamble under the heading "2. SPECIAL ALLOCATION RULES FOR WORKING CAPITAL EXPENDITURES" paragraph 2, lines 10 through 13, the language "a refunded issue, amounts from a bona fide debt service fund, and extraordinary non- periodic legal judgments. In addition, the special" is corrected to read "a refunded issue and amounts from a bona fide debt service fund. In addition, the special".

3. On page 20977, column 2, under the authority citation, lines 8 and 9, remove the language, "Section 1.149(d)-1T also issued under 26 U.S.C. 148(f) and (i).".

4. On page 20978, column 3, section 1.148-0(b)(3), last line of that paragraph, the language " 1989, or issued after June 14, 1989." is corrected to read "1989, or issued after June 14, 1989; provided that the provisions of 26 CFR 1.148-9T(c) and (h) (as contained in the CFR edition revised as of April 1, 1991) generally apply to any bond that is issued on or before June 17, 1992.".

5. On page 20981, column 3, section 1.148-0(d), the table of contents for section 1.148-9 is corrected by removing the entries for paragraphs (h) and (h)(1) through (h)(3).

6. On page 20982, column 2, section 1.148-1(a), lines 11 through 13, the language "0T for scope and effective date. See section 1.148- 6 for 6 month temporary investment exception. See section 1.148-7 for" is corrected to read "0 for scope and effective date. See section 1.148-6 for expenditure exceptions. See section 1.148-7 for".

7. On page 20984, column 3, section 1.148-2(c)(1), the formula "FV=PV(1+i)" is corrected to read "FV=PV(1+i)(to the power of n)".

8. On 20985, column 2, section 1.148-2(c)(2), paragraph (i) of Example 2, second line from the bottom of that paragraph, the language "the first installment computation is the same" is corrected to read "the first installment computation date is the same".

9. On page 20986, column 2, section 1.148-2(d)(2), ninth line from the bottom of the column, the language "there are bid and asked prices). The bid" is corrected to read "there are bid and asked prices). If the price paid to purchase an obligation of the type described in the proviso clause of the preceding sentence is higher than the mean of the bid and asked prices, that higher price may be treated as the fair market value of the obligation if that obligation is purchased in a bona fide arm's length transaction without regard to any amount paid to reduce the yield on the obligation. The bid".

10. On page 20986, column 3, section 1.148-2(d)(4), beginning in line 4, the last sentence "See paragraph (e)(2)(iii)(B) of this section for special rule determining this present value." is removed.

11. On page 20989, column 3, section 1.148-3(b)(7)(iv)(B), lines 4 through 8, the language "value is an amount equal to the sum of the issue price for the bond, determined under section 1.148-8(c), and the amount of accrued original issue discount, determined under section 1288(a)." is corrected to read "value is an amount equal to the present value of the bond."

12. On page 20995, column 1, section 1.148-3(c)(7), under Example 2 lines 7 through 11, the language "September 15, 1991, is the issue price of the bonds, plus any accrued original issue discount. See paragraph (b)(7)(iv)(A) of this section. The aggregate early retirement value of the bonds is par plus accrued interest" is corrected to read "September 15, 1991, is par plus accrued interest".

13. On page 21003, column 2, section 1.148-3(d)(4), paragraph (ii)(A) of Example 9, lines 3 and 4, the language "All the proceeds of the bonds are expended by that date." is removed.

14. On page 21005, column 3, section 1.148-3(d)(4), paragraph (ii)(G) of Example 11, the first line in the table is corrected to read as follows:

Date           Debt service   Guarantee      PV (7.1485008956%)

15. On page 21008, column 2, section 1.148-4(c)(5) , line 1, the language "(5) SAFE HARBORS FOR PURCHASES OF" is corrected to read "(5) SAFE HARBOR FOR PURCHASES OF".

16. On page 21009, column 2, section 1.148-4(d)(3)(ii), lines 3 and 4, the language "in paragraphs (d)(3)(ii)(A) and (d)(3)(ii)(B) of this section may be" is corrected to read "in paragraphs (d)(3)(ii)(B) and (d)(3)(ii)(C) of this section may be".

17. On page 21011, column 1, section 1.148-4(e)(6)(i)(A), third line from the bottom of that paragraph, the language "issue, the present value of that bond" is corrected to read "the issue, the present value of that bond".

18. On page 21012, column 1, section 1.148-5 (c)(1)(iii), seventh and eighth lines from the bottom of paragraph, the language "described in paragraph (c)(1)(ii)(A) or (c)(1)(ii)(C) of this section that is" is corrected to read "described in paragraph (c)(1)(ii)(A) of the section that is".

19. On page 21017, column 1, section 1.148-6(i)(2), seventh line from the bottom of that paragraph, the language "148(f)(4)(c)(vii) or (viii) for any period" is corrected to read "148(f)(4)(C)(vii) or (Viii) for any period".

20. On page 21021, column 3, section 1.148-8(c)(3), lines 3 and 4, the language "determined under this paragraph (c) exceed the fair market value of the bond" is corrected to read "determined under this paragraph (c) be less than the fair market value of the bond".

21. On page 21021, column 3, section 1.148-8(d)(3), fifth line from the bottom of that column, the language "section 1.103- 13(b)(5)(viii), or section 143(g)(2)." is corrected to read "section 1.103-13(b)(5)(viii), section 143(g)(2) or section 1.148-10(b).".

22. On page 21023, column 2, section 1.148-8(e)(13), line 4, the language "and is not purchased pursuant an" is corrected to read "and is not purchased pursuant to an".

23. On page 21023, column 2, section 1.148-8(e)(14), line 3, the language "an issue, a contract entered into for the " is corrected to read "to an issue, a contract entered into for the".

24. On page 21023, column 2, section 1.148-8(e)(14), line 5, the language "the issue (and elated amounts) from" is corrected to read "the issue (and related amounts) from".

25. On page 21024, column 1, section 1.148-8(h)(4), line 3, the language "sections 1.148-0T(b)(2)(ii)(C) and 1.148-3" is corrected to read "sections 1.148-0(b)(2)(ii)(C) and 1.148-3".

26. On page 21024, bottom of column 1 and top of column 2, section 1.148-9, remove paragraph (h).

27. On page 21025, column 2, in instructional "Par. 7.", line 1, the language "Par. 7. A new 1.148-11 is added to" is corrected read "Par. 7. A new section 1.148-11 is added to".

28. On page 21026, column 1, section 1.148-11(b)(2)(i), lines 2 and 3, the language "issue is not refunding issue if the proceeds of the issue are used to pay" is corrected to read "issue is not a refunding issue as a result of the use of the proceeds of the issue to pay".

29. On page 21026, column 1, section 1.148-11(b)(2)(i)(C), lines 2 and 3, the language "expenditure (as defined in section 1.148- 4(d)(3)(ii))." is corrected to read "expenditure under section 1.148- 4(d)(3)(ii)(C).".

30. On page 21026, column 3, section 1.148-11(c)(1)(i)(A) is corrected to read as follows:

* * * * *

"(A) The amounts are reasonably expected by the issuer to become available to be used either for investment for a period of more than 6 months from their date of receipt or for payment of debt service on the prior issue or any other issue (whether or not so used); and"

* * * * *

31. On page 21028, column 1, section 1.148-11(e)(2)(i) , seventh line from the top of the column, the language "complies with section 1.148-4(e); provided that" is corrected to read "complies with section 1.148-4 provided that".

32. On page 21028, column 1, section 1.148-11(e)(2)(ii), line 14, the language "with section 1.148-4(e); provided that the" is corrected to read "with section 1.148-4; provided that the".

33. On page 21028, column 3, section 1.148-11(f)(2)(vii), last line of that paragraph, the language "defined in section 1.103- 13(b)(12) is 13 months." is corrected read "defined in section 1.103- 13(b)(12)) is 13 months.".

34. On page 21028, column 3, section 1.148-11(f)(3) , line 3, the language "may elect to waive any temporary" is corrected to read "may waive any temporary".

35. On page 21029, column 1, section 1.148-11(g), second and fourth lines from the bottom of that paragraph, the reference "149(d)(3)(v)" is corrected to read "149(d)(3)(A)(v)(II)" in both locations.

36. On page 21030, column 2, section 1.148-11(j)(5), line 2, the language "ALLOCATIONS. This paragraph (j) does not" is corrected to read "ALLOCATIONS. Except for purposes of section 149(d)(3)(A)(i), this paragraph (j) does not".

37. On page 21030, column 2, section 1.148-11(j)(5), last line, the language "permit re-allocations of the 1980 issue." is corrected to read "permit allocations of the 1980 issue under section 148.".

38. On page 21031, column 1, section 1.148-13T(b)(1), last line of that paragraph, the language "date and" is corrected to read "date; and".

39. On page 21031, column 1, immediately before instructional paragraph 10, a new instructional "Par. 9A." is added to read as follows:

"Par. 9A. Sect-ion 1.149(d)-1T is removed."

40. On page 21031, column 2, section 1.149(d)-1(d)(2), second line from the bottom of that paragraph, the language "section 1.148- 0T(b)(2)(ii) for bonds to which" is corrected to read "section 1.148- 0(b)(2)(ii) for bonds to which".

41. On page 21031, column 2, immediately before instructional paragraph 11, instructional "Par. 10A." is added to read as follows:

"Par. 10A. Sections 1.150-0T and 1.150-1T are removed."

42. On pages 21632 and 21633, bottom of column 3 and continue on the top of column 1 of the next page, section 602.101(c), the entries in the table are corrected to read as follows:

* * * * *

CFR part or section                          Current OMB