Page:United States Statutes at Large Volume 98 Part 1.djvu/970

 98 STAT. 922

PUBLIC LAW 98-369—JULY 18, 1984 PART II—ARBITRAGE LIMITATIONS SEC. 624. ARBITRAGE ON NONPURPOSE OBLIGATIONS.

26 USC 103.

(a) IN GENERAL.—Subsection (c) of section 103 (relating to arbitrage bonds) is amended by redesignating paragraph (6) as paragraph (7) and inserting after paragraph (5) the following new paragraph: "(6) INVESTMENTS IN NONPURPOSE OBLIGATIONS.—

42 USC 14371.

"(A) IN GENERAL.—For purposes of this title, any obligation which is part of an issue of industrial development bonds which does not meet the requirements of subparagraphs (C) and (D) shall be treated as an obligation which is not described in subsection (a). "(B) EXCEPTIONS.—Subparagraph (A) shall not apply to any obligation described in subsection (b)(4)(A) or to any housing program obligation under section 11(b) of the Housing Act of 1937. "(C) LIMITATION ON INVESTMENT IN NONPURPOSE OBLIGATIONS.—

"(i) IN GENERAL.—An issue meets the requirements of this subparagraph only if— "(I) at no time during any bond year, the amount invested in nonpurpose obligations with a yield higher than the yield on the issue exceeds 150 percent of the debt service on the issue for the bond year, and "(II) the aggregate amount invested as provided in subclause (I) is promptly and appropriately reduced as the amount of outstanding obligations of the issue is reduced. "(ii) EXCEPTION FOR TEMPORARY PERIODS.—Clause (i)

shall not apply to— "(I) proceeds of the issue invested for an initial temporary period until such proceeds are needed for the governmental purpose of the issue, and "(II) temporary investment periods related to debt service, "(iii) DEBT SERVICE DEFINED.—For purposes of this subparagraph, the debt service on the issue for any bond year is the scheduled amount of interest and amortization of principal payable for such year with respect to such issue. For purposes of the preceding sentence, there shall not be taken into account amounts scheduled with respect to any bond which has been retired before the beginning of the bond year, "(iv) N O DISPOSITION IN CASE OF LOSS.—This subpara-

graph shall not require the sale or disposition of any investment if such sale or disposition would result in a loss which exceeds the amount which would be paid to the United States (but for such sale or disposition) at the time of such sale or disposition. "(D) REBATE TO UNITED STATES.—An issue shall be treated as meeting the requirements of this subparagraph only if an amount equal to the sum of— "(i) the excess of—

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