# Prop. Treas. Reg. § 1.141-14: Refunding issues.

Proposed regulation, not in force. FI-72-88, 94-31430, published 1994-12-30 <https://www.federalregister.gov/documents/1994/12/30/94-31430/definition-of-private-activity-bonds>. Interprets 26 U.S.C. § 141.

Par. 4. Sections 1.141-0 through 1.141-16 are added to read as follows:

(a) Private activity bond status--(1) In general. Whether a refunding issue satisfies the private business tests or the private loan financing tests is determined exclusively on the use of the proceeds of the refunding issue and the private security or payments with respect to that issue (that is, without regard to whether the prior issue satisfied those tests).

(2) Rules of application--(i) Private business use and private loan financing tests. In applying section 141 to a refunding issue, except as otherwise provided in this paragraph (a)(2), the proceeds of the refunding issue are treated as used for the same purposes as the proceeds of the prior issue except that the use of the property financed with the proceeds of the prior issue before the issue date of the refunding issue is not taken into account.

(ii) Special rule. If, as of the issue date of the refunding issue, the weighted average maturity of the refunding issue is greater than 120 percent of the remaining average economic life of the property financed with the proceeds of the prior issue, the proceeds of the refunding issue are treated as being used for the same purposes as the proceeds of the prior issue and use of the property financed with the proceeds of the prior issue before the issue date of the refunding issue is taken into account.

(3) Optional treatment as continuation of prior issue. In applying the private business use test and the private security or payment test (including under Sec. 1.141-7) to a refunding issue, the issuer may treat the entire refunding issue as a continuation of the prior issue. For this purpose, under the private security or payment test (including under Sec. 1.141-7), the issuer may use the yield on the refunded issue to present value payments and security from arrangements that were not entered into in contemplation of the refunding issue.

(b) Qualified bonds--(1) In general. Generally, whether bonds issued as part of a refunding issue are qualified bonds (other than bonds issued under sections 144(a) or 1394) is determined exclusively on the basis of the use of the proceeds of the refunding issue, determined in the same manner as under paragraph (a)(2) of this section. In addition, section 147(d) is applied as of the issue date of the prior issue. A refunding issue meets the requirements of section 147(b) if the refunded issue met these requirements and the weighted average maturity of the refunding bonds is not greater than the remaining weighted average maturity of the refunded bonds. See also Sec. 1.103-8.

(2) Discontinued use in certain qualified bonds. If, as of the issue date of the refunding bonds, the property that was financed by the proceeds of the refunded bond is not used (or is not reasonably expected to continue to be used), and the refunded bond was a qualified bond under sections 142, 144(a), 144(c), or 1394, the refunding bond is a qualified bond only if--

(i) The refunding issue does not have a weighted average maturity that exceeds the remaining weighted average maturity of the refunded bonds; and

(ii) The refunded bonds were qualified bonds.