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respect to the issue of which such bond is a 
part, and 
‘‘(B) any such payment or loan is made in 
equal amounts from the proceeds of such issue 
and from the amount pledged under subpara-
graph (A). 
The requirement of subparagraph (B) shall be treat-
ed as met with respect to any such payment or loan 
made during the 1-year period beginning on the date 
of the issuance (or any successor 1-year period) if 
such requirement is met when applied with respect 
to the aggregate amount of such payments and loans 
made during such period. 
‘‘(3) AGGREGATE
LIMIT
ON
BOND
DESIGNA-
TIONS.—The maximum aggregate face amount of 
bonds which may be designated under this section by 
the Governor of a State shall not exceed— 
‘‘(A) $200,000,000 in the case of the State 
of Louisiana, 
‘‘(B) $100,000,000 in the case of the State 
of Mississippi, and 
‘‘(C) $50,000,000 in the case of the State 
of Alabama. 
‘‘(4) SPECIAL
RULES
RELATING
TO
ARBI-
TRAGE.—A bond which is part of an issue shall not
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be treated as a Gulf tax credit bond unless, with re-
spect to the issue of which the bond is a part, the 
issuer satisfies the arbitrage requirements of section 
148 with respect to proceeds of the issue and any 
loans made with such proceeds. 
‘‘(e) QUALIFIED BOND.—For purposes of this sec-
tion— 
‘‘(1) IN GENERAL.—The term ‘qualified bond’ 
means any obligation of a State or political subdivi-
sion thereof which was outstanding on August 28, 
2005. 
‘‘(2) 
EXCEPTION
FOR
PRIVATE
ACTIVITY 
BONDS.—Such term shall not include any private ac-
tivity bond. 
‘‘(3) 
EXCEPTION
FOR
ADVANCE 
REFUNDINGS.—Such term shall not include any 
bond— 
‘‘(A) which is designated as an advance re-
funding bond under section 149(d)(7), or 
‘‘(B) with respect to which there is any 
outstanding bond to refund such bond. 
‘‘(f) CREDIT INCLUDED IN GROSS INCOME.—Gross 
income includes the amount of the credit allowed to the 
taxpayer under this section (determined without regard to
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subsection (c)) and the amount so included shall be treat-
ed as interest income. 
‘‘(g) OTHER DEFINITIONS AND SPECIAL RULES.— 
For purposes of this section— 
‘‘(1) BOND.—The term ‘bond’ includes any ob-
ligation. 
‘‘(2) 
PARTNERSHIP; 
S
CORPORATION; 
AND 
OTHER PASS-THRU ENTITIES.— 
‘‘(A) IN
GENERAL.—Under regulations 
prescribed by the Secretary, in the case of a 
partnership, trust, S corporation, or other pass- 
thru entity, rules similar to the rules of section 
41(g) shall apply with respect to the credit al-
lowable under subsection (a). 
‘‘(B) NO BASIS ADJUSTMENT.—In the case 
of a bond held by a partnership or an S cor-
poration, rules similar to the rules under sec-
tion 1397E(i) shall apply. 
‘‘(3) BONDS
HELD
BY
REGULATED
INVEST-
MENT COMPANIES.—If any Gulf tax credit bond is 
held by a regulated investment company, the credit 
determined under subsection (a) shall be allowed to 
shareholders of such company under procedures pre-
scribed by the Secretary.
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‘‘(4) REPORTING.—Issuers of Gulf tax credit 
bonds shall submit reports similar to the reports re-
quired under section 149(e).’’. 
(b) CONFORMING AMENDMENTS.— 
(1) Paragraph (2) of section 54(c) of such Code 
is amended by inserting ‘‘, section 54A,’’ after ‘‘sub-
part C’’. 
(2) Subparagraph (A) of section 6049(d)(8) of 
such Code is amended— 
(A) by inserting ‘‘or 54A(f)’’ after ‘‘section 
54(g)’’, and 
(B) by inserting ‘‘or 54A(b)(4), as the case 
may be’’ after ‘‘section 54(b)(4)’’. 
(3) The table of sections for subpart H of part 
IV of subchapter A of chapter 1 of such Code is 
amended by adding at the end the following new 
item: 
‘‘Sec. 54A. Credit to holders of Gulf tax credit bonds.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years ending after De-
cember 31, 2005. 
SEC. 3. ADVANCE REFUNDINGS OF CERTAIN TAX-EXEMPT 
BONDS. 
(a) IN GENERAL.—Subsection (d) of section 149 of 
the Internal Revenue Code of 1986 (relating to advance 
refundings) is amended by redesignating paragraph (7) as
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paragraph (8) and by inserting after paragraph (6) the 
following new paragraph: 
‘‘(7) ADVANCE REFUNDINGS OF CERTAIN GULF 
COAST BONDS.— 
‘‘(A) IN
GENERAL.—With respect to a 
bond described in subparagraph (C) which is 
not a qualified 501(c)(3) bond, one additional 
advance refunding after the date of the enact-
ment of this paragraph and before January 1, 
2011, shall be allowed under the applicable 
rules of this subsection if— 
‘‘(i) the Governor of the State des-
ignates the advance refunding bond for 
purposes of this paragraph, and 
‘‘(ii) the requirements of subpara-
graph (E) are met. 
‘‘(B) 
CERTAIN
PRIVATE
ACTIVITY 
BONDS.—With respect to a bond described in 
subparagraph (C) which is an exempt facility 
bond described in paragraph (1) or (2) of sec-
tion 142(a), one advance refunding after the 
date of the enactment of this paragraph and be-
fore January 1, 2011, shall be allowed under 
the applicable rules of this subsection (notwith-
standing paragraph (2)) if the requirements of