TREATMENT OF CERTAIN POOLED FINANCING BONDS.

SEC. 5051. TREATMENT OF CERTAIN POOLED FINANCING BONDS. (a) In General.— Section 149 of the 1986 Code is amended by adding at the end thereof the following new subsection: “(f) Treatment of Certain Pooled Financing Bonds.— “(1) In general.— Section 103(a) shall not apply to any pooled financing bond unless, with respect to the issue of which such bond is a part, the requirements of paragraphs (2) and (3) are met. “(2) Reasonable expectation requirement.— “(A) In general.— The requirements of this paragraph are met with respect to an issue if the issuer reasonably expects that as of the close of the 3-year period beginning on the date of issuance of the issue, at least 95 percent of the net proceeds of the issue (as of the close of such period) will have been used directly or indirectly to make or finance loans to ultimate borrowers. “(B) Certain factors may not be taken into account in determining expectations.— Expectations as to changes in interest rates or in the provisions of this title (or in the regulations or rulings thereunder) may not be taken into account in determining whether expectations are reasonable for purposes of this paragraph. “(C) Net proceeds.— For purposes of subparagraph (A), the term ‘net proceeds’ has the meaning given such term by section 150 but shall not include proceeds used to finance issuance costs and shall not include proceeds necessary to pay interest (during such period) on the bonds which are part of the issue. “(D) Refunding bonds.— For purposes of subparagraph (A), in the case of a refunding bond, the date of issuance taken into account is the date of issuance of the original bond. “(3) Cost of issuance payment requirements.— The requirements of this paragraph are met with respect to an issue if— “(A) the payment of legal and underwriting costs associated with the issuance of the issue is not contingent, and “(B) at least 95 percent of the reasonably expected legal and underwriting costs associated with the issuance of the issue are paid not later than the 180th day after the date of the issuance of the issue. “(4) Pooled financing bond.— For purposes of this subsection— “(A) In general.— The term ‘pooled financing bond’ means any bond issued as part of an issue more than $5,000,000 of the proceeds of which are reasonably expected (at the time of the issuance of the bonds) to be used (or are intentionally used) directly or indirectly to make or finance loans to 2 or more ultimate borrowers. 102 STAT. 3677 “(B) Exceptions.— Such term shall not include any bond if— “(i) section 146 applies to the issue of which such bond is a part (other than by reason of section 141(b)(5)) or would apply but for section 146(i), or “(ii) section 143(1)(3) applies to such issue. “(5) Definition of loan; treatment of mixed use issues.— “(A) Loan.— For purposes of this subsection, the term ‘loan’ does not include— “(i) any loan which is a nonpurpose investment (within the meaning of section 148(f)(6)(A), determined without regard to section 148(b)(3)), and “(ii) any use of proceeds by an agency of the issuer unless such agency is a political subdivision or instrumentality of the issuer. “(B) Portion of issue to be used for loans treated as separate issue.— If only a portion of the proceeds of an issue is reasonably expected (at the time of issuance of the bond) to be used (or is intentionally used) as described in paragraph (4)(A), such portion and the other portion of such issue shall be treated as separate issues for purposes of determining whether such portion meets the requirements of this subsection.” (b) Effective Date.— (1) In general.— The amendment made by subsection (a) shall apply to bonds issued after October 21, 1988. (2) Special rule for refunding bonds.— In the case of a bond issued to refund a bond issued before October 22, 1988— (A) if the 3-year period described in section 149(f)(2)(A) of the 1986 Code would (but for this paragraph) expire on or before October 22, 1989, such period shall expire on October 21, 1990, and (B) if such period expires after October 22, 1989, the portion of the proceeds of the issue of which the refunded bond is a part which is available (on the date of issuance of the refunding issue) to provide loans shall be treated as proceeds of a separate issue (issued after October 21, 1988) for purposes of applying section 149(f) of the 1986 Code.