I 

115TH CONGRESS 

2D SESSION H. R. 5003 

To amend the Internal Revenue Code of 1986 to reinstate advance refunding 

bonds. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 13, 2018 

Mr. HULTGREN (for himself, Mr. RUPPERSBERGER, Mr. MESSER, Mr. ROYCE

of California, Mr. KILDEE, and Mr. CAPUANO) introduced the following 

bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to reinstate 

advance refunding bonds. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. TREATMENT OF ADVANCE REFUNDING BONDS. 

4 (a) IN GENERAL.—Section 149(d) of the Internal 

5 Revenue Code of 1986 is amended— 

6 (1) in paragraph (1), by striking ‘‘to advance 

7 refund another bond’’ and inserting ‘‘as part of an 

8 issue described in paragraph (2), (3), or (4)’’; 

9 (2) by redesignating paragraphs (2) and (3) as 

10 paragraphs (6) and (7), respectively; and 


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1 (3) by inserting after paragraph (1) the fol2 lowing new paragraphs: 

3 ‘‘(2) CERTAIN PRIVATE ACTIVITY BONDS.—An 

4 issue is described in this paragraph if any bond 

5 (issued as part of such issue) is issued to advance 

6 refund a private activity bond (other than a qualified 

7 501(c)(3) bond). 

8 ‘‘(3) OTHER BONDS.— 

9 ‘‘(A) IN GENERAL.—An issue is described 

10 in this paragraph if any bond (issued as part of 

11 such issue), hereinafter in this paragraph re12 ferred to as the ‘refunding bond’, is issued to 

13 advance refund a bond unless— 

14 ‘‘(i) the refunding bond is only— 

15 ‘‘(I) the 1st advance refunding of 

16 the original bond if the original bond 

17 is issued after 1985, or 

18 ‘‘(II) the 1st or 2nd advance re19 funding of the original bond if the 

20 original bond was issued before 1986, 

21 ‘‘(ii) in the case of refunded bonds 

22 issued before 1986, the refunded bond is 

23 redeemed not later than the earliest date 

24 on which such bond may be redeemed at 

25 par or at a premium of 3 percent or less, 


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1 ‘‘(iii) in the case of refunded bonds 

2 issued after 1985, the refunded bond is re3 deemed not later than the earliest date on 

4 which such bond may be redeemed, 

5 ‘‘(iv) the initial temporary period 

6 under section 148(c) ends— 

7 ‘‘(I) with respect to the proceeds 

8 of the refunding bond not later than 

9 30 days after the date of issue of such 

10 bond, and 

11 ‘‘(II) with respect to the proceeds 

12 of the refunded bond on the date of 

13 issue of the refunding bond, and 

14 ‘‘(v) in the case of refunded bonds to 

15 which section 148(e) did not apply, on and 

16 after the date of issue of the refunding 

17 bond, the amount of proceeds of the re18 funded bond invested in higher yielding in19 vestments (as defined in section 148(b)) 

20 which are nonpurpose investments (as de21 fined in section 148(f)(6)(A)) does not ex22 ceed— 

23 ‘‘(I) the amount so invested as 

24 part of a reasonably required reserve 


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1 or replacement fund or during an al2 lowable temporary period, and 

3 ‘‘(II) the amount which is equal 

4 to the lesser of 5 percent of the pro5 ceeds of the issue of which the re6 funded bond is a part or $100,000 (to 

7 the extent such amount is allocable to 

8 the refunded bond). 

9 ‘‘(B) SPECIAL RULES FOR REDEMP10 TIONS.— 

11 ‘‘(i) ISSUER MUST REDEEM ONLY IF

12 DEBT SERVICE SAVINGS.—Clause (ii) and 

13 (iii) of subparagraph (A) shall apply only 

14 if the issuer may realize present value debt 

15 service savings (determined without regard 

16 to administrative expenses) in connection 

17 with the issue of which the refunding bond 

18 is a part. 

19 ‘‘(ii) REDEMPTIONS NOT REQUIRED

20 BEFORE 90TH DAY.—For purposes of 

21 clauses (ii) and (iii) of subparagraph (A), 

22 the earliest date referred to in such clauses 

23 shall not be earlier than the 90th day after 

24 the date of issuance of the refunding bond. 


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1 ‘‘(4) ABUSIVE TRANSACTIONS PROHIBITED.— 

2 An issue is described in this paragraph if any bond 

3 (issued as part of such issue) is issued to advance 

4 refund another bond and a device is employed in 

5 connection with the issuance of such issue to obtain 

6 a material financial advantage (based on arbitrage) 

7 apart from savings attributable to lower interest 

8 rates. 

9 ‘‘(5) SPECIAL RULES FOR PURPOSES OF PARA10 GRAPH (3).—For purposes of paragraph (3), bonds 

11 issued before the date of the enactment of this sub12 section shall be taken into account under subpara13 graph (A)(i) thereof except— 

14 ‘‘(A) a refunding which occurred before 

15 1986 shall be treated as an advance refunding 

16 only if the refunding bond was issued more 

17 than 180 days before the redemption of the re18 funded bond, and 

19 ‘‘(B) a bond issued before 1986, shall be 

20 treated as advance refunded no more than once 

21 before March 15, 1986.’’. 

22 (b) CONFORMING AMENDMENT.—Section 

23 148(f)(4)(C) of such Code is amended by redesignating 

24 clauses (xiv) through (xvi) as clauses (xv) through (xvii) 


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1 and by inserting after clause (xiii) the following new 

2 clause: 

3 ‘‘(xiv) DETERMINATION OF INITIAL

4 TEMPORARY PERIOD.—For purposes of 

5 this subparagraph, the end of the initial 

6 temporary period shall be determined with7 out regard to section 149(d)(3)(A)(iv).’’. 

8 (c) EFFECTIVE DATE.—The amendments made by 

9 this section shall apply to advance refunding bonds issued 

10 after the date of the enactment of this Act. 

Æ 


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