Sec. 1.149(d)-1 Limitations on advance refundings.

In general.

     An advance refunding issue employs an abusive device and is described in section 149(d)(4) if the issue violates any of the anti-abuse rules under section 1.148-10.

(2) Failure to pay required rebate.

     An advance refunding issue is described in section 149(d)(4) if the issue fails to meet the requirements of section 1.148-3. This paragraph (b)(2) applies to any advance refunding issue issued after August 31, 1986.

(3) Mixed escrows invested in tax-exempt bonds.

     An advance refunding issue is described in section 149(d)(4) if --

Tax-exempt conduit loans.

     For purposes of applying section 149(d) to a conduit financing issue that finances any conduit loan that is a tax-exempt bond, the actual issuer of a conduit financing issue and the conduit borrower of that conduit financing issue are treated as related parties. Thus, the issue date of the conduit loan does not occur prior to the date on which the actual issuer of the conduit financing issue sells, exchanges, or otherwise disposes of that conduit loan, and the use of the proceeds of the disposition to pay debt service on the conduit financing issue causes the conduit loan to be a refunding issue. See section 1.148-10(d), Example 4.

Application of multipurpose issue rules.

     For purposes of sections 149(d)(2) and (3)(A)(i), (ii), and (iii), the provisions of the multipurpose issue rule in section 1.148-9(h) apply, except that the limitation in section 1.148-9(h)(5) is disregarded.

(2) General mixed escrow rules.

     For purposes of section 149(d), the provisions of section 1.148-9(c) (relating to mixed escrows) apply, except that those provisions do not apply for purposes of section 149(d)(2) and (d)(3)(A)(i) and (ii) to amounts that were not gross proceeds of the prior issue before the issue date of the refunding issue.

(3) Temporary periods and minor portions.

     Section 1.148-9(d) and (f) contains rules applicable to temporary periods and minor portions for advance refunding issues.

(4) Definitions.

     Section 1.148-1 applies for purposes of section 149(d).

In general.

     Except as provided in paragraph (e)(2) of this section, for purposes of section 149(d)(3)(A)(i), an advance refunding issue the interest on which is not excludable from gross income under section 103(a) (i.e., a taxable advance refunding issue) is not taken into account. In addition, for this purpose, an advance refunding of a taxable issue is not taken into account unless the taxable issue is a conduit loan of a tax-exempt conduit financing issue.

(2) Use to avoid section 149(d)(3)(A)(i).

     A taxable issue is taken into account under section 149(d)(3)(A)(i) if it is issued to avoid the limitations of that section. For example, in the case of a refunding of a tax-exempt issue with a taxable advance refunding issue that is, in turn, currently refunded with a tax-exempt issue, the taxable advance refunding issue is taken into account under section 149(d)(3)(A)(i) if the two tax-exempt issues are outstanding concurrently for more than 90 days.

General rule.

     Under sections 149(d)(3)(A)(ii) and (iii) (the FIRST CALL REQUIREMENT), bonds refunded by an advance refunding must be redeemed on their first call date if the savings test under section 149(d)(3)(B)(i) (the SAVINGS TEST) is satisfied. The savings test is satisfied 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.

(2) First call date.

     FIRST CALL DATE means the earliest date on which a bond may redeemed (or, if issued before 1986, on the earliest date on which that bond may be redeemed at a redemption price not in excess of 103 percent of par). If, however, the savings test is not met with respect to the date described in the preceding sentence (i.e., there are no present value savings if the refunded bonds are retired on that date), the first call date is the first date thereafter on which the bonds can be redeemed and on which the savings test is met.

(3) Application of savings test to multipurpose issues.

     Except as otherwise provided in this paragraph (f)(3), the multipurpose issue rules in section 1.148-9(h) apply for purposes of the savings test. If any separate issue in a multipurpose issue increases the aggregate present value debt service savings on the entire multipurpose issue or reduces the present value debt service losses on that entire multipurpose issue, that separate issue satisfies the savings test.

(1) Includes a qualified bond described in section 141(e) (other than a qualified 501(c)(3) bond), regardless of whether the refunding issue consists of private activity bonds under § 1.141-13; and

(2) Does not include a taxable bond.

In general.

     Except as provided in this paragraph (h), this section applies to bonds issued after June 30, 1993, to which §§ 1.148-1 through 1.148-11 apply, including conduit loans that are treated as issued after June 30, 1993, under paragraph (b)(4) of this section. In addition, this section applies to any issue to which the election described in § 1.148-11(b)(1) is made.

(2) Special effective date for paragraph (b)(3).

     Paragraph (b)(3) of this section applies to any advance refunding issue issued after May 28, 1991.

(3) Special effective date for paragraph (f)(3).

     Paragraph (f)(3) of this section applies to bonds sold on or after July 8, 1997 and to any issue to which the election described in § 1.148-11(b)(1) is made. See § 1.148-11A(i) for rules relating to certain bonds sold before July 8, 1997.

(4) Special effective date for paragraph (g).

     See § 1.141-15 for the applicability date of paragraph (g) of this section.