MODIFICATION OF SMALL ISSUER EXCEPTION TO TAX-EXEMPT INTEREST EXPENSE ALLOCATION RULES FOR FINANCIAL INSTITUTIONS.

SEC. 1502. MODIFICATION OF SMALL ISSUER EXCEPTION TO TAX-EXEMPT INTEREST EXPENSE ALLOCATION RULES FOR FINANCIAL INSTITUTIONS.(a) In General.—Paragraph (3) of section 265(b) (relating to exception for certain tax-exempt obligations) is amended by adding at the end the following new subparagraph:“(G) Special rules for obligations issued during 2009 and 2010.—“(i) Increase in limitation.—In the case of obligations issued during 2009 or 2010, subparagraphs (C)(i), (D)(i), and (D)(iii)(II) shall each be applied by substituting ‘$30,000,000’ for ‘$10,000,000’.“(ii) Qualified 501(c)(3) bonds treated as issued by exempt organization.—In the case of a qualified 501(c)(3) bond (as defined in section 145) issued during 2009 or 2010, this paragraph shall be applied by treating the 501(c)(3) organization for whose benefit such bond was issued as the issuer.“(iii) Special rule for qualified financings.—In the case of a qualified financing issue issued during 2009 or 2010—“(I) subparagraph (F) shall not apply, and“(II) any obligation issued as a part of such issue shall be treated as a qualified tax-exempt 123 STAT. 354 obligation if the requirements of this paragraph are met with respect to each qualified portion of the issue (determined by treating each qualified portion as a separate issue which is issued by the qualified borrower with respect to which such portion relates).“(iv) Qualified financing issue.—For purposes of this subparagraph, the term ‘qualified financing issue’ means any composite, pooled, or other conduit financing issue the proceeds of which are used directly or indirectly to make or finance loans to 1 or more ultimate borrowers each of whom is a qualified borrower.“(v) Qualified portion.—For purposes of this subparagraph, the term ‘qualified portion’ means that portion of the proceeds which are used with respect to each qualified borrower under the issue.“(vi) Qualified borrower.—For purposes of this subparagraph, the term ‘qualified borrower’ means a borrower which is a State or political subdivision thereof or an organization described in section 501(c)(3) and exempt from taxation under section 501(a).”.(b) Effective Date.—The amendment made by this section shall apply to obligations issued after December 31, 2008.