LOAN AND REDEMPTION REQUIREMENTS ON POOLED FINANCING REQUIREMENTS.

SEC. 508. LOAN AND REDEMPTION REQUIREMENTS ON POOLED FINANCING REQUIREMENTS. (a) Strengthened Reasonable Expectation Requirement.—Subparagraph (A) of section 149(f)(2) (relating to reasonable expectation requirement) is amended to read as follows: “(A) In general.—The requirements of this paragraph are met with respect to an issue if the issuer reasonably expects that—“(i) as of the close of the 1-year period beginning on the date of issuance of the issue, at least 30 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, and “(ii) as of the close of the 3-year period beginning on such date of issuance, at least 95 percent of the net proceeds of the issue (as of the close of such period) will have been so used.”. (b) Written Loan Commitment and Redemption Requirements.—Section 149(f) (relating to treatment of certain pooled financing bonds) is amended by redesignating paragraphs (4) and (5) as paragraphs (6) and (7), respectively, and by inserting after paragraph (3) the following new paragraphs: 120 STAT. 362 “(4) Written loan commitment requirement.—“(A) In general.—The requirement of this paragraph is met with respect to an issue if the issuer receives prior to issuance written loan commitments identifying the ultimate potential borrowers of at least 30 percent of the net proceeds of such issue. “(B) Exception.—Subparagraph (A) shall not apply with respect to any issuer which—“(i) is a State (or an integral part of a State) issuing pooled financing bonds to make or finance loans to subordinate governmental units of such State, or “(ii) is a State-created entity providing financing for water-infrastructure projects through the federally-sponsored State revolving fund program. “(5) Redemption requirement.—The requirement of this paragraph is met if to the extent that less than the percentage of the proceeds of an issue required to be used under clause (i) or (ii) of paragraph (2)(A) is used by the close of the period identified in such clause, the issuer uses an amount of proceeds equal to the excess of—“(A) the amount required to be used under such clause, over “(B) the amount actually used by the close of such period, to redeem outstanding bonds within 90 days after the end of such period.”. (c) Elimination of Disregard of Pooled Bonds in Determining Eligibility for Small Issuer Exception to Arbitrage Rebate.—Section 148(f)(4)(D)(ii) (relating to aggregation of issuers) is amended by striking subclause (II) and by redesignating subclauses (III) and (IV) as subclauses (II) and (III), respectively. (d) Conforming Amendments.—(1) Section 149(f)(1) is amended by striking “paragraphs (2) and (3)” and inserting “paragraphs (2), (3), (4), and (5)”. (2) Section 149(f)(7)(B), as redesignated by subsection (b), is amended by striking “paragraph (4)(A)” and inserting “paragraph (6)(A)”. (3) Section 54(l)(2) is amended by striking “section 149(f)(4)(A)” and inserting “section 149(f)(6)(A)”. (e) Effective Date.—The amendments made by this section shall apply to bonds issued after the date of the enactment of this Act.