100 STAT. 2646
PUBLIC LAW 99-514—OCT. 22, 1986
d Notwithstanding any other provision of this title, no deduction sfi shall be allowed for any amount paid to the United States under paragraph (2). "(6) DEFINITIONS.—For purposes of this subsection and subsec•- tions (c) and (d)— "(A) NoNPURPOSE INVESTMENT.—The term 'nonpurpose investment' means any investment property which— "(i) is acquired with the gross proceeds of an issue, •'- '. and , "(ii) is not acquired in order to carry out the governmental purpose of the issue. "(B) GROSS PROCEEDS.—Except as otherwise provided by the Secretary, the gross proceeds of an issue include— •" -'*'" "(i) amounts received (including repayments of principal) as a result of investing the original proceeds of the issue, and "(ii) amounts to be used to pay debt service on the
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issue. "(7) PENALTY IN UEU OF LOSS OF TAX EXEMPTION.—In the case of an issue which would (but for this paragraph) fail to meet the requirements of paragraph (2) or (3), the Secretary may treat . such issue as not failing to meet such requirements if— "(A) no bond which is part of such issue is a private .;/, activity bond (other than a qualified 501(c)(3) bond), "(B) the failure to meet such requirements is due to reasonable cause and not to willful neglect, and "(C) the issuer pays to the United States a penalty in an amount equal to the sum of— "(i) 50 percent of the amount which was not paid in accordance with paragraphs (2) and (3), plus >t "(ii) interest (at the underpayment rate established o J-' ' & under section 6621) on the portion of the amount which was not paid on the date required under paragraph (3) for the period beginning on such date. The Secretary may waive all or any portion of the penalty under this paragraph. "(g) STUDENT LOAN INCENTIVE PAYMENTS.—Except to the extent otherwise provided in regulations, payments made by the Secretary of Education pursuant to section 438 of the Higher Education Act of 1965 are not to be taken into account, for purposes of subsection (a)(D, in determining yields on student loan notes. "(h) DETERMINATIONS OF YIELD.—For purposes of this section, the yield on an issue shall be determined on the basis of the issue price (within the meaning of sections 1273 and 1274). "(i) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section. "SEC. 149. BONDS MUST BE REGISTERED TO BE TAX EXEMPT; OTHER REQUIREMENTS. "(a) BONDS MUST B E REGISTERED TO B E TAX EXEMPT.— 5,, "(1) GENERAL RULE.—Nothing in section 103(a) or in any other
provision of law shall be construed to provide an exemption from Federal income tax for interest on any registration-required bond unless such bond is in registered form.
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