I

103D CONGRESS

1ST SESSION H. R. 2102

To amend the Internal Revenue Code of 1986 to enable small, zero-coupon

municipal bonds to be issued and later redeemed at an accreted value

less an early redemption penalty.

IN THE HOUSE OF REPRESENTATIVES

MAY 12, 1993

Mr. LEWIS of Georgia 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 enable

small, zero-coupon municipal bonds to be issued and

later redeemed at an accreted value less an early redemption penalty.

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

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Tax-Exempt Municipal

5 Savings Bond Act of 1993’’.
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1 SEC. 2. CHANGES IN RULES RELATING TO TAX-EXEMPT

2 BONDS.

3 (a) TEMPORARY PERIOD EXCEPTION FOR SMALL

4 DENOMINATION ORIGINAL ISSUE DISCOUNT BONDS IN5 CREASED TO 12 MONTHS.—Subsection (c) of section 148

6 of the Internal Revenue Code of 1986 is amended by add7 ing at the end thereof the following new paragraph:

8 ‘‘(3) LONGER TEMPORARY PERIOD FOR SMALL

9 DENOMINATION ORIGINAL ISSUE DISCOUNT

10 BONDS.—The temporary period referred to in para11 graph (1) shall not exceed 12 months with respect

12 to bonds that are issued as original issue discount

13 bonds in denominations of $1,000 or less and are

14 sold to individuals within the State of the issuing

15 jurisdiction.’’

16 (b) CHANGE IN RULES FOR REASONABLY REQUIRED

17 RESERVE FUND FOR SMALL DENOMINATION ORIGINAL

18 ISSUE DISCOUNT BONDS.—Subsection (d) of section 148

19 is amended as follows:

20 (1) Paragraph (1) of subsection (d) is amended

21 by adding at the end thereof the following new sen22 tence: ‘‘However, in the case of original issue dis23 count bonds that are issued in denominations of

24 $1,000 or less and are sold to individuals within the

25 State of the issuing jurisdiction a higher amount is

26 permitted for reasonably expected redemptions that
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1 are exercised at the option of the holder of the bond

2 at predetermined rates established at the time of

3 issuance.’’

4 (2) Paragraph (2) of subsection (d) is amended

5 by striking the paragraph and inserting in its place

6 the following:

7 ‘‘(2) LIMITATION ON AMOUNT IN RESERVE OR

8 REPLACEMENT FUND WHICH MAY BE FINANCED BY

9 ISSUE.—A bond issue as part of an issue shall be

10 treated as an arbitrage bond if the amount of the

11 proceeds from the sale of such issue which is part

12 of any reserve or replacement fund exceeds 10 per13 cent of the proceeds of the issue (or such higher

14 amount which the issuer establishes is necessary to

15 the satisfaction of the Secretary or for the early re16 demption of such small denomination original issue

17 discount bonds).’’

18 (3) Paragraph (3) of subsection (d) is amended

19 by adding at the end of the words in the last phrase

20 ‘‘on the issue for the bond year’’ in (B)(i) the follow21 ing:

22 ‘‘unless an additional amount is required to

23 meet reasonably anticipated early redemptions

24 of such small denomination original issue dis25 count bonds’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to obligations issued after the date

3 of enactment.

Æ