656
PUBLIC LAW 91-172-DEC. 30, 1969
[83 STAT.
(c) CLERICAL AMENDMENT.—The table of sections for subchapter S of chapter 1 is amended by adding at the end thereof the following new item: "Sec. 1379. Certain qualified pensions, etc., plans."
(d) EFFECTIVE DATE.—The amendments made by this section shall apply with respect to taxable years of electing small business corporations beginning after December 31, 1970.
TITLE VI—STATE AND LOCAL OBLIGATIONS SEC. 601. ARBITRAGE BONDS. 82^stl^'266?^'
(^). ^ ^ Tp B E TREATED AS TAX-EXEMPT OBLIGATIONS.—Section 103
26 USC 103.
(relating to interest on certain governmental obligations) is amended by redesignating subsection (d) as (e), and by inserting after subsection (c) the following new subsection: " (d) ARBITRAGE BONDS.— " (1) SUBSECTION (a)(1) NOT TO APPLY.—Except as provided in
26 USC 165.
68A Stat. 42.
26 USC 318.
this subsection, any arbitrage bond shall be treated as an obligation not described in subsection (a)(1). "(2) ARBITRAGE BOND.—For purposes of this subsection, the term 'arbitrage bond' means any obligation which is issued as part of an issue all or a major portion of the proceeds of which are reasonably expected to be used directly or indirectly— " (A) to acquire securities (within the meaning of section 165(g)(2)(A) or (B)) or obligations (other than obligations described in subsection (a)(1)) which may be reasonably expected at the time of issuance of such issue, to produce a yield over the term of the issue which is materially higher (taking into account any discount or premium) than the yield on obligations of such issue, or " (B) to replace funds which were used directly or indirectly to acquire securities or obligations described in subparagraph (A). "(3) EXCEPTION.—Paragraph (1) shall not apply to any obligation— " (A) which is issued as part of an issue substantially all of the proceeds of which are reasonably expected to be used to provide permanent financing for real property used or to be used for residential purposes for the personnel of an educational institution (within the meaning of section 151(6)(4)) which graiits baccalaureate or higher degrees, or to replace funds which were so used, and " (B) the yield on which over the term of the issue is not reasonably expected, at the time of issuance of such issue, to be substantially lower than the yield on obligations acquired or to be acquired in providing such financing. This paragraph shall not apply with respect to any obligation for any period during which it is held by a person who is a substantial user of property financed by the proceeds of the issue of which such obligation is a part, or by a member of the family (within the meaning of section 318(a)(1)) of any such person.
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