2023 Maryland Statutes › State Finance and Procurement › Division I - State Finance › Title 8 - Debt › Subtitle 4 - Capital Leases › Section 8-407 - Compliance With Internal Revenue Code; Exclusion of Interest From Gross Income

(a)    (1)    In this section the following words have the meanings indicated.
(2)    “Code” means the Internal Revenue Code of 1986 and includes regulations and rulings issued under that Code.
(3)    (i)    “Financial officer” means the secretary of the principal department that includes the appropriate unit or the head of the unit if the unit is an independent unit.
(ii)    “Financial officer” includes the Treasurer and the Comptroller.
(4)    “Proceeds” means money received from the sale of a capital lease, and includes any money deemed to be proceeds of a capital lease under the Code.
(b)    The financial officer may establish and maintain funds and accounts for the administration, management, investment and accounting of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.
(c)    (1)    The financial officer may manage and invest proceeds, including any investment earnings on proceeds, in a manner so as to maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.
(2)    The financial officer may restrict the yields on investments of proceeds if and to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.
(d)    The financial officer may prepare and maintain records of the receipt, deposit, investment, management, disbursement and application of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to maintain or verify the exclusion from gross income for federal income tax purposes of interest on a capital lease.
(e)    (1)    The financial officer may establish a separate rebate fund to be used to make any payments to the United States with respect to investment earnings on proceeds that may be required from time to time by the Code.
(2)    There may be separate accounts within the rebate fund.
(3)    Amounts deposited to the rebate fund shall be used only for the purpose of making rebate payments to the United States.
(4)    The financial officer may make payments from the rebate fund as may be required from time to time in order to:
(i)    comply with the Code; and
(ii)    maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.
(5)    Any excess money held in the rebate fund with respect to a capital lease after all required rebate payments for that capital lease have been made, as certified by the financial officer, shall be applied in a manner consistent with the Code.
(f)    The financial officer may prepare and file from time to time with the appropriate agency of the United States any forms, information, and reports with respect to each capital lease and the expenditure and investment of proceeds that may be required under the Code.
(g)    The financial officer and other officers of a State unit may:
(1)    take any other or further actions;
(2)    enter into any agreement or covenant regarding the use of proceeds, including any investment earnings on proceeds, the deposit of money to the rebate fund, and the making of rebate payments; and
(3)    provide certifications of facts and estimates, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on a capital lease.
(h)    Nothing in this section shall prevent the Treasurer from entering into a capital lease the interest on which is not excludable from gross income for federal income tax purposes.