Tax-exempt interest
(A) In general
(A)In general#
Interest on specified private activity bonds reduced by any deduction (not allowable in computing the regular tax) which would have been allowable if such interest were includible in gross income.
(B)Treatment of exempt-interest dividends#
Under regulations prescribed by the Secretary, any exempt-interest dividend (as defined in section 852(b)(5)(A)) shall be treated as interest on a specified private activity bond to the extent of its proportionate share of the interest on such bonds received by the company paying such dividend.
(C)Specified private activity bonds#
(i) In general For purposes of this part, the term “specified private activity bond” means any private activity bond (as defined in section 141) which is issued after August 7, 1986 , and the interest on which is not includible in gross income under section 103.
(ii) Exception for qualified 501(c)(3) bonds For purposes of clause (i), the term “private activity bond” shall not include any qualified 501(c)(3) bond (as defined in section 145).
(iii) Exception for certain housing bonds For purposes of clause (i), the term “private activity bond” shall not include any bond issued after the date of the enactment of this clause if such bond is— (I) an exempt facility bond issued as part of an issue 95 percent or more of the net proceeds of which are to be used to provide qualified residential rental projects (as defined in section 142(d)), (II) a qualified mortgage bond (as defined in section 143(a)), or (III) a qualified veterans’ mortgage bond (as defined in section 143(b)).
The preceding sentence shall not apply to any refunding bond unless such preceding sentence applied to the refunded bond (or in the case of a series of refundings, the original bond).
(iv) Exception for refundings For purposes of clause (i), the term “private activity bond” shall not include any refunding bond (whether a current or advance refunding) if the refunded bond (or in the case of a series of refundings, the original bond) was issued before August 8, 1986 .
(v) Certain bonds issued before September 1, 1986 For purposes of this subparagraph, a bond issued before September 1, 1986 , shall be treated as issued before August 8, 1986 , unless such bond would be a private activity bond if— (I) paragraphs (1) and (2) of section 141(b) were applied by substituting “25 percent” for “10 percent” each place it appears, (II) paragraphs (3), (4), and (5) of section 141(b) did not apply, and (III) subparagraph (B) of section 141(c)(1) did not apply.
(vi) Exception for bonds issued in 2009 and 2010 (I) In general For purposes of clause (i), the term “private activity bond” shall not include any bond issued after December 31, 2008 , and before January 1, 2011 . (II) Treatment of refunding bonds For purposes of subclause (I), a refunding bond (whether a current or advance refunding) shall be treated as issued on the date of the issuance of the refunded bond (or in the case of a series of refundings, the original bond). (III) Exception for certain refunding bonds Subclause (II) shall not apply to any refunding bond which is issued to refund any bond which was issued after December 31, 2003 , and before January 1, 2009 .