26 U.S.C. § 142 : US Code - Section 142: Exempt facility bond

Search 26 U.S.C. § 142 : US Code - Section 142: Exempt facility bond

(a) General rule
For purposes of this part, the term "exempt facility bond" means
any bond issued as part of an issue 95 percent or more of the net
proceeds of which are to be used to provide -
(1) airports,
(2) docks and wharves,
(3) mass commuting facilities,
(4) facilities for the furnishing of water,
(5) sewage facilities,
(6) solid waste disposal facilities,
(7) qualified residential rental projects,
(8) facilities for the local furnishing of electric energy or
gas,
(9) local district heating or cooling facilities,
(10) qualified hazardous waste facilities,
(11) high-speed intercity rail facilities,
(12) environmental enhancements of hydroelectric generating
facilities,
(13) qualified public educational facilities,
(14) qualified green building and sustainable design projects,
or
(15) qualified highway or surface freight transfer facilities.
(b) Special exempt facility bond rules
For purposes of subsection (a) -
(1) Certain facilities must be governmentally owned
(A) In general
A facility shall be treated as described in paragraph (1),
(2), (3), or (12) of subsection (a) only if all of the property
to be financed by the net proceeds of the issue is to be owned
by a governmental unit.
(B) Safe harbor for leases and management contracts
For purposes of subparagraph (A), property leased by a
governmental unit shall be treated as owned by such
governmental unit if -
(i) the lessee makes an irrevocable election (binding on
the lessee and all successors in interest under the lease)
not to claim depreciation or an investment credit with
respect to such property,
(ii) the lease term (as defined in section 168(i)(3)) is
not more than 80 percent of the reasonably expected economic
life of the property (as determined under section 147(b)),
and
(iii) the lessee has no option to purchase the property
other than at fair market value (as of the time such option
is exercised).
Rules similar to the rules of the preceding sentence shall
apply to management contracts and similar types of operating
agreements.
(2) Limitation on office space
An office shall not be treated as described in a paragraph of
subsection (a) unless -
(A) the office is located on the premises of a facility
described in such a paragraph, and
(B) not more than a de minimis amount of the functions to be
performed at such office is not directly related to the day-to-
day operations at such facility.
(c) Airports, docks and wharves, mass commuting facilities and high-
speed intercity rail facilities
For purposes of subsection (a) -
(1) Storage and training facilities
Storage or training facilities directly related to a facility
described in paragraph (1), (2), (3) or (11) of subsection (a)
shall be treated as described in the paragraph in which such
facility is described.
(2) Exception for certain private facilities
Property shall not be treated as described in paragraph (1),
(2), (3) or (11) of subsection (a) if such property is described
in any of the following subparagraphs and is to be used for any
private business use (as defined in section 141(b)(6)).
(A) Any lodging facility.
(B) Any retail facility (including food and beverage
facilities) in excess of a size necessary to serve passengers
and employees at the exempt facility.
(C) Any retail facility (other than parking) for passengers
or the general public located outside the exempt facility
terminal.
(D) Any office building for individuals who are not employees
of a governmental unit or of the operating authority for the
exempt facility.
(E) Any industrial park or manufacturing facility.
(d) Qualified residential rental project
For purposes of this section -
(1) In general
The term "qualified residential rental project" means any
project for residential rental property if, at all times during
the qualified project period, such project meets the requirements
of subparagraph (A) or (B), whichever is elected by the issuer at
the time of the issuance of the issue with respect to such
project:
(A) 20-50 test
The project meets the requirements of this subparagraph if 20
percent or more of the residential units in such project are
occupied by individuals whose income is 50 percent or less of
area median gross income.
(B) 40-60 test
The project meets the requirements of this subparagraph if 40
percent or more of the residential units in such project are
occupied by individuals whose income is 60 percent or less of
area median gross income.
For purposes of this paragraph, any property shall not be treated
as failing to be residential rental property merely because part
of the building in which such property is located is used for
purposes other than residential rental purposes.
(2) Definitions and special rules
For purposes of this subsection -
(A) Qualified project period
The term "qualified project period" means the period
beginning on the 1st day on which 10 percent of the residential
units in the project are occupied and ending on the latest of -

(i) the date which is 15 years after the date on which 50
percent of the residential units in the project are occupied,
(ii) the 1st day on which no tax-exempt private activity
bond issued with respect to the project is outstanding, or
(iii) the date on which any assistance provided with
respect to the project under section 8 of the United States
Housing Act of 1937 terminates.
(B) Income of individuals; area median gross income
The income of individuals and area median gross income shall
be determined by the Secretary in a manner consistent with
determinations of lower income families and area median gross
income under section 8 of the United States Housing Act of 1937
(or, if such program is terminated, under such program as in
effect immediately before such termination). Determinations
under the preceding sentence shall include adjustments for
family size. Section 7872(g) shall not apply in determining the
income of individuals under this subparagraph.
(3) Current income determinations
For purposes of this subsection -
(A) In general
The determination of whether the income of a resident of a
unit in a project exceeds the applicable income limit shall be
made at least annually on the basis of the current income of
the resident.
(B) Continuing resident's income may increase above the
applicable limit
If the income of a resident of a unit in a project did not
exceed the applicable income limit upon commencement of such
resident's occupancy of such unit (or as of any prior
determination under subparagraph (A)), the income of such
resident shall be treated as continuing to not exceed the
applicable income limit. The preceding sentence shall cease to
apply to any resident whose income as of the most recent
determination under subparagraph (A) exceeds 140 percent of the
applicable income limit if after such determination, but before
the next determination, any residential unit of comparable or
smaller size in the same project is occupied by a new resident
whose income exceeds the applicable income limit.
(4) Special rule in case of deep rent skewing
(A) In general
In the case of any project described in subparagraph (B), the
2d sentence of subparagraph (B) of paragraph (3) shall be
applied by substituting -
(i) "170 percent" for "140 percent", and
(ii) "any low-income unit in the same project is occupied
by a new resident whose income exceeds 40 percent of area
median gross income" for "any residential unit of comparable
or smaller size in the same project is occupied by a new
resident whose income exceeds the applicable income limit".
(B) Deep rent skewed project
A project is described in this subparagraph if the owner of
the project elects to have this paragraph apply and, at all
times during the qualified project period, such project meets
the requirements of clauses (i), (ii), and (iii):
(i) The project meets the requirements of this clause if 15
percent or more of the low-income units in the project are
occupied by individuals whose income is 40 percent or less of
area median gross income.
(ii) The project meets the requirements of this clause if
the gross rent with respect to each low-income unit in the
project does not exceed 30 percent of the applicable income
limit which applies to individuals occupying the unit.
(iii) The project meets the requirements of this clause if
the gross rent with respect to each low-income unit in the
project does not exceed 1/2 of the average gross rent with
respect to units of comparable size which are not occupied by
individuals who meet the applicable income limit.
(C) Definitions applicable to subparagraph (B)
For purposes of subparagraph (B) -
(i) Low-income unit
The term "low-income unit" means any unit which is required
to be occupied by individuals who meet the applicable income
limit.
(ii) Gross rent
The term "gross rent" includes -
(I) any payment under section 8 of the United States
Housing Act of 1937, and
(II) any utility allowance determined by the Secretary
after taking into account such determinations under such
section 8.
(5) Applicable income limit
For purposes of paragraphs (3) and (4), the term "applicable
income limit" means -
(A) the limitation under subparagraph (A) or (B) of paragraph
(1) which applies to the project, or
(B) in the case of a unit to which paragraph (4)(B)(i)
applies, the limitation which applies to such unit.
(6) Special rule for certain high cost housing area
In the case of a project located in a city having 5 boroughs
and a population in excess of 5,000,000, subparagraph (B) of
paragraph (1) shall be applied by substituting "25 percent" for
"40 percent".
(7) Certification to Secretary
The operator of any project with respect to which an election
was made under this subsection shall submit to the Secretary (at
such time and in such manner as the Secretary shall prescribe) an
annual certification as to whether such project continues to meet
the requirements of this subsection. Any failure to comply with
the provisions of the preceding sentence shall not affect the tax-
exempt status of any bond but shall subject the operator to
penalty, as provided in section 6652(j).
(e) Facilities for the furnishing of water
For purposes of subsection (a)(4), the term "facilities for the
furnishing of water" means any facility for the furnishing of water
if -
(1) the water is or will be made available to members of the
general public (including electric utility, industrial,
agricultural, or commercial users), and
(2) either the facility is operated by a governmental unit or
the rates for the furnishing or sale of the water have been
established or approved by a State or political subdivision
thereof, by an agency or instrumentality of the United States, or
by a public service or public utility commission or other similar
body of any State or political subdivision thereof.
(f) Local furnishing of electric energy or gas
For purposes of subsection (a)(8) -
(1) In general
The local furnishing of electric energy or gas from a facility
shall only include furnishing solely within the area consisting
of -
(A) a city and 1 contiguous county, or
(B) 2 contiguous counties.
(2) Treatment of certain electric energy transmitted outside
local area
(A) In general
A facility shall not be treated as failing to meet the local
furnishing requirement of subsection (a)(8) by reason of
electricity transmitted pursuant to an order of the Federal
Energy Regulatory Commission under section 211 or 213 of the
Federal Power Act (as in effect on the date of the enactment of
this paragraph) if the portion of the cost of the facility
financed with tax-exempt bonds is not greater than the portion
of the cost of the facility which is allocable to the local
furnishing of electric energy (determined without regard to
this paragraph).
(B) Special rule for existing facilities
In the case of a facility financed with bonds issued before
the date of an order referred to in subparagraph (A) which
would (but for this subparagraph) cease to be tax-exempt by
reason of subparagraph (A), such bonds shall not cease to be
tax-exempt bonds (and section 150(b)(4) shall not apply) if, to
the extent necessary to comply with subparagraph (A) -
(i) an escrow to pay principal of, premium (if any), and
interest on the bonds is established within a reasonable
period after the date such order becomes final, and
(ii) bonds are redeemed not later than the earliest date on
which such bonds may be redeemed.
(3) Termination of future financing
For purposes of this section, no bond may be issued as part of
an issue described in subsection (a)(8) with respect to a
facility for the local furnishing of electric energy or gas on or
after the date of the enactment of this paragraph unless -
(A) the facility will -
(i) be used by a person who is engaged in the local
furnishing of that energy source on January 1, 1997, and
(ii) be used to provide service within the area served by
such person on January 1, 1997 (or within a county or city
any portion of which is within such area), or
(B) the facility will be used by a successor in interest to
such person for the same use and within the same service area
as described in subparagraph (A).
(4) Election to terminate tax-exempt bond financing by certain
furnishers
(A) In general
In the case of a facility financed with bonds issued before
the date of the enactment of this paragraph which would cease
to be tax-exempt by reason of the failure to meet the local
furnishing requirement of subsection (a)(8) as a result of a
service area expansion, such bonds shall not cease to be tax-
exempt bonds (and section 150(b)(4) shall not apply) if the
person engaged in such local furnishing by such facility makes
an election described in subparagraph (B).
(B) Election
An election is described in this subparagraph if it is an
election made in such manner as the Secretary prescribes, and
such person (or its predecessor in interest) agrees that -
(i) such election is made with respect to all facilities
for the local furnishing of electric energy or gas, or both,
by such person,
(ii) no bond exempt from tax under section 103 and
described in subsection (a)(8) may be issued on or after the
date of the enactment of this paragraph with respect to all
such facilities of such person,
(iii) any expansion of the service area -
(I) is not financed with the proceeds of any exempt
facility bond described in subsection (a)(8), and
(II) is not treated as a nonqualifying use under the
rules of paragraph (2), and
(iv) all outstanding bonds used to finance the facilities
for such person are redeemed not later than 6 months after
the later of -
(I) the earliest date on which such bonds may be
redeemed, or
(II) the date of the election.
(C) Related persons
For purposes of this paragraph, the term "person" includes a
group of related persons (within the meaning of section
144(a)(3)) which includes such person.
(g) Local district heating or cooling facility
(1) In general
For purposes of subsection (a)(9), the term "local district
heating or cooling facility" means property used as an integral
part of a local district heating or cooling system.
(2) Local district heating or cooling system
(A) In general
For purposes of paragraph (1), the term "local district
heating or cooling system" means any local system consisting of
a pipeline or network (which may be connected to a heating or
cooling source) providing hot water, chilled water, or steam to
2 or more users for -
(i) residential, commercial, or industrial heating or
cooling, or
(ii) process steam.
(B) Local system
For purposes of this paragraph, a local system includes
facilities furnishing heating and cooling to an area consisting
of a city and 1 contiguous county.
(h) Qualified hazardous waste facilities
For purposes of subsection (a)(10), the term "qualified hazardous
waste facility" means any facility for the disposal of hazardous
waste by incineration or entombment but only if -
(1) the facility is subject to final permit requirements under
subtitle C of title II of the Solid Waste Disposal Act (as in
effect on the date of the enactment of the Tax Reform Act of
1986), and
(2) the portion of such facility which is to be provided by the
issue does not exceed the portion of the facility which is to be
used by persons other than -
(A) the owner or operator of such facility, and
(B) any related person (within the meaning of section
144(a)(3)) to such owner or operator.
(i) High-speed intercity rail facilities
(1) In general
For purposes of subsection (a)(11), the term "high-speed
intercity rail facilities" means any facility (not including
rolling stock) for the fixed guideway rail transportation of
passengers and their baggage between metropolitan statistical
areas (within the meaning of section 143(k)(2)(B)) using vehicles
that are reasonably expected to operate at speeds in excess of
150 miles per hour between scheduled stops, but only if such
facility will be made available to members of the general public
as passengers.
(2) Election by nongovernmental owners
A facility shall be treated as described in subsection (a)(11)
only if any owner of such facility which is not a governmental
unit irrevocably elects not to claim -
(A) any deduction under section 167 or 168, and
(B) any credit under this subtitle,
with respect to the property to be financed by the net proceeds
of the issue.
(3) Use of proceeds
A bond issued as part of an issue described in subsection
(a)(11) shall not be considered an exempt facility bond unless
any proceeds not used within a 3-year period of the date of the
issuance of such bond are used (not later than 6 months after the
close of such period) to redeem bonds which are part of such
issue.
(j) Environmental enhancements of hydroelectric generating
facilities
(1) In general
For purposes of subsection (a)(12), the term "environmental
enhancements of hydroelectric generating facilities" means
property -
(A) the use of which is related to a federally licensed
hydroelectric generating facility owned and operated by a
governmental unit, and
(B) which -
(i) protects or promotes fisheries or other wildlife
resources, including any fish by-pass facility, fish
hatchery, or fisheries enhancement facility, or
(ii) is a recreational facility or other improvement
required by the terms and conditions of any Federal licensing
permit for the operation of such generating facility.
(2) Use of proceeds
A bond issued as part of an issue described in subsection
(a)(12) shall not be considered an exempt facility bond unless at
least 80 percent of the net proceeds of the issue of which it is
a part are used to finance property described in paragraph
(1)(B)(i).
(k) Qualified public educational facilities
(1) In general
For purposes of subsection (a)(13), the term "qualified public
educational facility" means any school facility which is -
(A) part of a public elementary school or a public secondary
school, and
(B) owned by a private, for-profit corporation pursuant to a
public-private partnership agreement with a State or local
educational agency described in paragraph (2).
(2) Public-private partnership agreement described
A public-private partnership agreement is described in this
paragraph if it is an agreement -
(A) under which the corporation agrees -
(i) to do 1 or more of the following: construct,
rehabilitate, refurbish, or equip a school facility, and
(ii) at the end of the term of the agreement, to transfer
the school facility to such agency for no additional
consideration, and
(B) the term of which does not exceed the term of the issue
to be used to provide the school facility.
(3) School facility
For purposes of this subsection, the term "school facility"
means -
(A) any school building,
(B) any functionally related and subordinate facility and
land with respect to such building, including any stadium or
other facility primarily used for school events, and
(C) any property, to which section 168 applies (or would
apply but for section 179), for use in a facility described in
subparagraph (A) or (B).
(4) Public schools
For purposes of this subsection, the terms "elementary school"
and "secondary school" have the meanings given such terms by
section 14101 of the Elementary and Secondary Education Act of
1965 (20 U.S.C. 8801), as in effect on the date of the enactment
of this subsection.
(5) Annual aggregate face amount of tax-exempt financing
(A) In general
An issue shall not be treated as an issue described in
subsection (a)(13) if the aggregate face amount of bonds issued
by the State pursuant thereto (when added to the aggregate face
amount of bonds previously so issued during the calendar year)
exceeds an amount equal to the greater of -
(i) $10 multiplied by the State population, or
(ii) $5,000,000.
(B) Allocation rules
(i) In general
Except as otherwise provided in this subparagraph, the
State may allocate the amount described in subparagraph (A)
for any calendar year in such manner as the State determines
appropriate.
(ii) Rules for carryforward of unused limitation
A State may elect to carry forward an unused limitation for
any calendar year for 3 calendar years following the calendar
year in which the unused limitation arose under rules similar
to the rules of section 146(f), except that the only purpose
for which the carryforward may be elected is the issuance of
exempt facility bonds described in subsection (a)(13).
(l) Qualified green building and sustainable design projects
(1) In general
For purposes of subsection (a)(14), the term "qualified green
building and sustainable design project" means any project which
is designated by the Secretary, after consultation with the
Administrator of the Environmental Protection Agency, as a
qualified green building and sustainable design project and which
meets the requirements of clauses (i), (ii), (iii), and (iv) of
paragraph (4)(A).
(2) Designations
(A) In general
Within 60 days after the end of the application period
described in paragraph (3)(A), the Secretary, after
consultation with the Administrator of the Environmental
Protection Agency, shall designate qualified green building and
sustainable design projects. At least one of the projects
designated shall be located in, or within a 10-mile radius of,
an empowerment zone as designated pursuant to section 1391, and
at least one of the projects designated shall be located in a
rural State. No more than one project shall be designated in a
State. A project shall not be designated if such project
includes a stadium or arena for professional sports exhibitions
or games.
(B) Minimum conservation and technology innovation objectives
The Secretary, after consultation with the Administrator of
the Environmental Protection Agency, shall ensure that, in the
aggregate, the projects designated shall -
(i) reduce electric consumption by more than 150 megawatts
annually as compared to conventional generation,
(ii) reduce daily sulfur dioxide emissions by at least 10
tons compared to coal generation power,
(iii) expand by 75 percent the domestic solar photovoltaic
market in the United States (measured in megawatts) as
compared to the expansion of that market from 2001 to 2002,
and
(iv) use at least 25 megawatts of fuel cell energy
generation.
(3) Limited designations
A project may not be designated under this subsection unless -
(A) the project is nominated by a State or local government
within 180 days of the enactment of this subsection, and
(B) such State or local government provides written
assurances that the project will satisfy the eligibility
criteria described in paragraph (4).
(4) Application
(A) In general
A project may not be designated under this subsection unless
the application for such designation includes a project
proposal which describes the energy efficiency, renewable
energy, and sustainable design features of the project and
demonstrates that the project satisfies the following
eligibility criteria:
(i) Green building and sustainable design
At least 75 percent of the square footage of commercial
buildings which are part of the project is registered for
United States Green Building Council's LEED certification and
is reasonably expected (at the time of the designation) to
receive such certification. For purposes of determining LEED
certification as required under this clause, points shall be
credited by using the following:
(I) For wood products, certification under the
Sustainable Forestry Initiative Program and the American
Tree Farm System.
(II) For renewable wood products, as credited for
recycled content otherwise provided under LEED
certification.
(III) For composite wood products, certification under
standards established by the American National Standards
Institute, or such other voluntary standards as published
in the Federal Register by the Administrator of the
Environmental Protection Agency.
(ii) Brownfield redevelopment
The project includes a brownfield site as defined by
section 101(39) of the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. 9601),
including a site described in subparagraph (D)(ii)(II)(aa)
thereof.
(iii) State and local support
The project receives specific State or local government
resources which will support the project in an amount equal
to at least $5,000,000. For purposes of the preceding
sentence, the term "resources" includes tax abatement
benefits and contributions in kind.
(iv) Size
The project includes at least one of the following:
(I) At least 1,000,000 square feet of building.
(II) At least 20 acres.
(v) Use of tax benefit
The project proposal includes a description of the net
benefit of the tax-exempt financing provided under this
subsection which will be allocated for financing of one or
more of the following:
(I) The purchase, construction, integration, or other use
of energy efficiency, renewable energy, and sustainable
design features of the project.
(II) Compliance with certification standards cited under
clause (i).
(III) The purchase, remediation, and foundation
construction and preparation of the brownfields site.
(vi) Prohibited facilities
An issue shall not be treated as an issue described in
subsection (a)(14) if any proceeds of such issue are used to
provide any facility the principal business of which is the
sale of food or alcoholic beverages for consumption on the
premises.
(vii) Employment
The project is projected to provide permanent employment of
at least 1,500 full time equivalents (150 full time
equivalents in rural States) when completed and construction
employment of at least 1,000 full time equivalents (100 full
time equivalents in rural States).
The application shall include an independent analysis which
describes the project's economic impact, including the amount
of projected employment.
(B) Project description
Each application described in subparagraph (A) shall contain
for each project a description of -
(i) the amount of electric consumption reduced as compared
to conventional construction,
(ii) the amount of sulfur dioxide daily emissions reduced
compared to coal generation,
(iii) the amount of the gross installed capacity of the
project's solar photovoltaic capacity measured in megawatts,
and
(iv) the amount, in megawatts, of the project's fuel cell
energy generation.
(5) Certification of use of tax benefit
No later than 30 days after the completion of the project, each
project must certify to the Secretary that the net benefit of the
tax-exempt financing was used for the purposes described in
paragraph (4).
(6) Definitions
For purposes of this subsection -
(A) Rural State
The term "rural State" means any State which has -
(i) a population of less than 4,500,000 according to the
2000 census,
(ii) a population density of less than 150 people per
square mile according to the 2000 census, and
(iii) increased in population by less than half the rate of
the national increase between the 1990 and 2000 censuses.
(B) Local government
The term "local government" has the meaning given such term
by section 1393(a)(5).
(C) Net benefit of tax-exempt financing
The term "net benefit of tax-exempt financing" means the
present value of the interest savings (determined by a
calculation established by the Secretary) which result from the
tax-exempt status of the bonds.
(7) Aggregate face amount of tax-exempt financing
(A) In general
An issue shall not be treated as an issue described in
subsection (a)(14) if the aggregate face amount of bonds issued
by the State or local government pursuant thereto for a project
(when added to the aggregate face amount of bonds previously so
issued for such project) exceeds an amount designated by the
Secretary as part of the designation.
(B) Limitation on amount of bonds
The Secretary may not allocate authority to issue qualified
green building and sustainable design project bonds in an
aggregate face amount exceeding $2,000,000,000.
(8) Termination
Subsection (a)(14) shall not apply with respect to any bond
issued after September 30, 2009.
(9) Treatment of current refunding bonds
Paragraphs (7)(B) and (8) shall not apply to any bond (or
series of bonds) issued to refund a bond issued under subsection
(a)(14) before October 1, 2009, if -
(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average maturity
date of the bonds to be refunded by such issue,
(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
(C) the net proceeds of the refunding bond are used to redeem
the refunded bond not later than 90 days after the date of the
issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A).
(m) Qualified highway or surface freight transfer facilities
(1) In general
For purposes of subsection (a)(15), the term "qualified highway
or surface freight transfer facilities" means -
(A) any surface transportation project which receives Federal
assistance under title 23, United States Code (as in effect on
the date of the enactment of this subsection),
(B) any project for an international bridge or tunnel for
which an international entity authorized under Federal or State
law is responsible and which receives Federal assistance under
title 23, United States Code (as so in effect), or
(C) any facility for the transfer of freight from truck to
rail or rail to truck (including any temporary storage
facilities directly related to such transfers) which receives
Federal assistance under either title 23 or title 49, United
States Code (as so in effect).
(2) National limitation on amount of tax-exempt financing for
facilities
(A) National limitation
The aggregate amount allocated by the Secretary of
Transportation under subparagraph (C) shall not exceed
$15,000,000,000.
(B) Enforcement of national limitation
An issue shall not be treated as an issue described in
subsection (a)(15) if the aggregate face amount of bonds issued
pursuant to such issue for any qualified highway or surface
freight transfer facility (when added to the aggregate face
amount of bonds previously so issued for such facility) exceeds
the amount allocated to such facility under subparagraph (C).
(C) Allocation by Secretary of Transportation
The Secretary of Transportation shall allocate the amount
described in subparagraph (A) among qualified highway or
surface freight transfer facilities in such manner as the
Secretary determines appropriate.
(3) Expenditure of proceeds
An issue shall not be treated as an issue described in
subsection (a)(15) unless at least 95 percent of the net proceeds
of the issue is expended for qualified highway or surface freight
transfer facilities within the 5-year period beginning on the
date of issuance. If at least 95 percent of such net proceeds is
not expended within such 5-year period, an issue shall be treated
as continuing to meet the requirements of this paragraph if the
issuer uses all unspent proceeds of the issue to redeem bonds of
the issue within 90 days after the end of such 5-year period. The
Secretary, at the request of the issuer, may extend such 5-year
period if the issuer establishes that any failure to meet such
period is due to circumstances beyond the control of the issuer.
(4) Exception for current refunding bonds
Paragraph (2) shall not apply to any bond (or series of bonds)
issued to refund a bond issued under subsection (a)(15) if -
(A) the average maturity date of the issue of which the
refunding bond is a part is not later than the average maturity
date of the bonds to be refunded by such issue,
(B) the amount of the refunding bond does not exceed the
outstanding amount of the refunded bond, and
(C) the refunded bond is redeemed not later than 90 days
after the date of the issuance of the refunding bond.
For purposes of subparagraph (A), average maturity shall be
determined in accordance with section 147(b)(2)(A).