[Federal Register Volume 63, Number 250 (Wednesday, December 30, 1998)]
[Rules and Regulations]
[Pages 71748-71752]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34209]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1 and 602

[TD 8801]
RIN 1545-AU39


Arbitrage Restrictions on Tax-Exempt Bonds

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations on the arbitrage 
restrictions applicable to tax-exempt bonds issued by State and local 
governments. Changes to applicable law were made by the Tax Reform Act 
of 1986. These regulations affect issuers of tax-exempt bonds and 
provide guidance for complying with the arbitrage regulations.

DATES: Effective Date: These regulations are effective on March 1, 
1999.
    Applicability Date: These regulations are applicable to bonds sold 
on or after March 1, 1999.
    Issuers may apply these regulations to bonds sold on or after 
December 30, 1998 and before March 1, 1999.

FOR FURTHER INFORMATION CONTACT: David White, 202-622-3980 (not a toll-
free number).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

    The collections of information contained in these final regulations 
have been reviewed and approved by the Office of Management and Budget 
in accordance with the Paperwork Reduction Act (44 U.S.C. 3507) under 
control number 1545-1490. Responses to these collections of information 
are required to obtain the benefits of a safe harbor.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless the collection of 
information displays a valid control number.
    The estimated annual burden per record keeper varies from .75 hour 
to 2 hours, depending on individual circumstances, with an estimated 
average of 1 hour.
    Comments concerning the accuracy of this burden estimate and 
suggestions for reducing this burden should be sent to the Internal 
Revenue Service, Attn: IRS Reports Clearance Officer, OP:FS:FP, 
Washington, DC 20224, and to the Office of Management and Budget, Attn: 
Desk Officer for the Department of the Treasury, Office of Information 
and Regulatory Affairs, Washington, DC 20503.
    Books or records relating to this collection of information must be 
retained as long as their contents may become material in the 
administration of any internal revenue law. Generally, tax returns and 
tax return information are confidential, as required by 26 U.S.C. 6103.

Background

    These final regulations contain amendments to the income tax 
regulations (26 CFR Part 1) under section 148 of the Internal Revenue 
Code of 1986 (Code). Section 148 provides rules addressing the use of 
proceeds of tax-exempt State and local bonds to acquire higher-yielding 
investments. On June 18, 1993, final regulations (TD 8476) relating to 
the arbitrage restrictions and related rules under sections 103, 148, 
149, and 150 were published in the Federal Register (58 FR 33510). 
Corrections to these regulations were published in the Federal Register 
on August 23, 1993 (58 FR 44451), and May 11, 1994 (59 FR 24350).
    On June 27, 1996, a notice of proposed rulemaking (FI-28-96) 
relating to the arbitrage restrictions was published in the Federal 
Register (61 FR 33405). The proposed regulations provide a rebuttable 
presumption for establishing fair market value for United States 
Treasury obligations that are purchased other than directly from the 
United States Treasury. In addition, the proposed regulations provide a 
rebuttable presumption that a solicitation that meets certain 
requirements is a bona fide solicitation for the guaranteed investment 
contract safe harbor of Sec. 1.148-5(d)(6)(iii). A public hearing was 
held on Thursday, October 24, 1996, and written comments were received. 
After consideration of all the comments, the regulations proposed by 
FI-28-96 are, with modifications, adopted by revision to Sec. 1.148-
5(d)(6)(iii). The changes are discussed below.

Explanation of Provisions

A. In General

    Due to concerns regarding the fair market purchase price of United 
States Treasury obligations purchased other than directly from the 
United States Treasury, the proposed regulations provide a rebuttable 
presumption for establishing fair market value. The proposed 
regulations generally apply the principles underlying the existing safe 
harbor in the arbitrage regulations for establishing fair market value 
for guaranteed investment contracts.
    The proposed regulations also provide a rebuttable presumption that 
a solicitation meeting the requirements of the proposed regulations 
will be a bona fide solicitation for the guaranteed investment contract 
safe harbor of existing Sec. 1.148-5(d)(6)(iii).
    Modifications to the proposed regulations have been made to clarify 
various technical aspects in response to comments received.

B. Safe Harbor

    Commentators noted that a rebuttable presumption in the proposed 
regulations for purchases of United States Treasury obligations 
provides a lower level of protection to issuers than the safe harbor 
applicable to guaranteed investment contracts. Commentators generally 
requested that the final regulations provide a safe harbor for the 
purchase of United States Treasury obligations.
    The final regulations create a safe harbor for all investments 
covered by the regulations, provided that the issuer receives at least 
three bids as required by the regulations. The premise of the final 
regulations is that a bidding procedure satisfying the requirements of 
the final regulations will produce a price that equals fair market 
value. If the requirements of the final regulations are not in fact 
met, no assumption can be made about the relationship of the price paid 
to fair market value. However, all reasonable and prudent actions taken 
by the issuer under the circumstances may be considered in determining 
whether the issuer paid fair market value.

[[Page 71749]]

C. Scope of Final Regulations

    Generally, the proposed regulations apply to United States Treasury 
obligations purchased other than directly from the United States 
Treasury. Commentators requested clarification regarding the scope of 
the proposed regulations and requested that the regulations only apply 
to investments purchased for yield restricted refunding and yield 
restricted sinking fund escrows. In addition, commentators asked that 
the proposed regulations be expanded to apply to other types of 
investments that may be purchased for an escrow (e.g., REFCORP strips).
    The final regulations apply only to guaranteed investment contracts 
and yield restricted defeasance escrows. With respect to yield 
restricted defeasance escrows, the final regulations expand the scope 
of investments covered by the proposed regulations to apply to all 
investments purchased for the escrow (e.g., United States Agency 
obligations, REFCORP strips and corporate obligations).

D. Guaranteed Investment Contracts

    Commentators requested clarification regarding which investments 
are covered by the safe harbor for guaranteed investment contracts and 
which would be covered by the proposed regulations.
    The term guaranteed investment contract generally does not include 
investments purchased for a yield restricted defeasance escrow. 
However, the term guaranteed investment contract does include escrow 
float contracts and similar agreements purchased for a yield restricted 
defeasance escrow. In addition, the term guaranteed investment contract 
includes debt service fund forward agreements and debt service reserve 
fund agreements (e.g., agreements to deliver United States Treasury 
obligations over a period of time).

E. No Last Look

    The proposed regulations state that all providers must have equal 
opportunity to bid and that no provider is permitted to review other 
bids before bidding (e.g., a last look). A small number of commentators 
noted that the existence of a last look may result in higher yields 
from competing providers. The final regulations retain the no last look 
requirement because permitting a last look may adversely affect the 
bona fides of the bidding process.

F. Reasonably Competitive Providers

    The proposed regulations provide that all bidders are required to 
be reasonably competitive providers of investments of the type being 
purchased. Numerous comments were received regarding the meaning of the 
phrase ``reasonably competitive provider,'' and commentators expressed 
concern that a bid from a non-competitive provider may prevent the 
requirements of the regulations from being satisfied.
    The final regulations modify this provision. The final regulations 
provide that the issuer must solicit at least three bids from 
reasonably competitive providers and that the issuer must receive at 
least one bid from a reasonably competitive provider. For purposes of 
the final regulations, a reasonably competitive provider is a provider 
that has an established industry reputation as a competitive provider 
of the type of investments being purchased. For example, in connection 
with the solicitation of bids for a guaranteed investment contract, an 
entity that has an established industry reputation as a competitive 
provider of guaranteed investment contracts is a reasonably competitive 
provider.

G. No Material Financial Interest

    The proposed regulations, like the existing safe harbor for 
guaranteed investment contracts, provide that the issuer must receive 
at least three bona fide bids from providers that have no material 
financial interest in the issue. For this purpose, the proposed 
regulations provide that underwriters and financial advisors for an 
issue are considered to have a material financial interest. Numerous 
comments were received regarding the scope of entities that are 
considered to have a material financial interest under the proposed 
regulations.
    The final regulations clarify that, for purchases of any investment 
covered by the safe harbor, the lead underwriter in a negotiated 
underwriting transaction is deemed to have a material financial 
interest in the issue until 15 days after the issue date of the issue. 
Any entity acting as a financial advisor with respect to the purchase 
of the investment at the time that the bid specification form is 
submitted to potential providers is also deemed to have a material 
financial interest in the issue. In addition, the final regulations 
require the provider to represent that its bid is not based on any 
other formal or informal agreement that the provider has with the 
issuer or any other person. A provider that is a related party to a 
provider that has a material financial interest in the issue is also 
deemed to have a material financial interest in the issue.

H. Commercially Reasonable Terms

    The proposed regulations provide that the terms of the purchase 
agreement must be reasonable. The existing safe harbor for guaranteed 
investment contracts provides that the terms of the guaranteed 
investment contract, including the collateral security requirements, 
must be reasonable. A number of commentators requested clarification 
regarding what reasonable means in connection with a solicitation of 
United States Treasury obligations.
    The final regulations provide that the terms of the bid 
specification for any investment covered by the safe harbor must be 
commercially reasonable. A term is commercially reasonable if there is 
a legitimate business purpose for including the term in the bid 
specifications other than to lower the yield or increase the cost of 
the bid. For example, in connection with the solicitation of 
investments for a yield restricted defeasance escrow, a commercially 
unreasonable term would be a hold firm period that is longer than the 
issuer reasonably requires.

I. Comparison to State and Local Government Series Securities

    The proposed regulations provide that the yield on any United 
States Treasury obligation purchased by the issuer may not be less than 
the yield then available on State and Local Government Series 
Securities from the United States Department of the Treasury, Bureau of 
Public Debt (SLGs) with the same maturity. Commentators requested that 
the SLGs comparison be removed or that issuers be allowed to make the 
comparison on a portfolio-by-portfolio basis. Commentators also 
requested guidance about the time period in which the SLGs comparison 
is to be made.
    In general, the final regulations provide that the safe harbor does 
not apply to investments purchased for a yield restricted defeasance 
escrow if the lowest cost bid is greater than the cost of the most 
efficient SLG portfolio. The final regulations provide that the lowest 
cost bid is the lowest bid for the portfolio or, if the issuer compares 
bids on an investment-by-investment basis, the aggregate cost of a 
portfolio comprised of the lowest cost bid for each investment. Any 
payment received by the issuer from a provider at the time a guaranteed 
investment contract is purchased (e.g., an escrow float contract) for a 
yield restricted defeasance escrow under a bidding procedure meeting 
the requirements of the final regulations is taken into

[[Page 71750]]

account in determining the lowest cost bid.
    The final regulations provide the following rules for comparing the 
lowest cost bid to SLGs. First, the most efficient SLG portfolio 
consists of one or more SLG securities that will allow the issuer to 
defease the refunded obligations at the lowest overall cost. Second, 
the comparison of the most efficient SLG portfolio and the lowest cost 
bid must be made at the time that bids are required to be submitted 
pursuant to the terms of the bid specifications. Intra-day pricing 
movements and closing spot prices of investments before and after the 
time in which the comparison to SLGs is required to be made are not 
relevant. Third, if SLGs are not available for purchase on the day that 
bids are required to be submitted pursuant to terms of the bid 
specifications because Treasury has suspended sales of those 
securities, the comparison of the most efficient SLG portfolio to the 
lowest cost bid is not required.
    No comparison to SLGs is required for purchases of guaranteed 
investment contracts.

J. Forward Pricing Data

    The proposed regulations provide that the yield on United States 
Treasury obligations purchased by the issuer may not be significantly 
less than the yield then available from the provider on reasonably 
comparable United States Treasury obligations offered to other persons 
for purchase on terms comparable to those offered to the issuer from a 
source of funds other than tax-exempt bonds. If closely comparable 
forward prices are not available, a reasonable basis for this 
comparison may be by reference to implied forward prices for Treasury 
obligations based on standard financial formulas. A certificate 
provided by the agent conducting the bidding process will establish 
that the comparison is met. The existing safe harbor for guaranteed 
investment contracts provides that the yield on the guaranteed 
investment contract may not be less than the yield then available from 
the provider on reasonably comparable guaranteed investment contracts, 
if any, offered to other persons from a source of funds other than 
gross proceeds of tax-exempt bonds.
    Commentators noted that, in general, the comparison required by the 
proposed regulations is either too complex or not possible to 
construct. In lieu of a comparability requirement, commentators 
recommended that the regulations adopt certain additional safeguards to 
protect the integrity of the bidding process.
    The final regulations remove the comparability requirement for all 
investments covered by the safe harbor. However, the final regulations 
include additional requirements to ensure a competitive bidding 
process. For example, the final regulations require that the bid form 
forwarded to potential providers include a statement notifying 
providers that by submitting a bid the potential provider is 
representing that it did not consult with any other providers about 
their bid, and that its bid is not being submitted solely as a courtesy 
to the issuer or any other person for purposes of satisfying the 
requirement that the issuer receive three bids. It is anticipated that 
these additional requirements will ensure that the bids reflect fair 
market value, as determined without regard to the source of funds.

K. Record Keeping Requirements

    The proposed regulations provide that issuers are required to 
retain certain records and information with the bond documents, 
including a copy of the bids received (date and time stamped). Numerous 
comments were received regarding the difficulty of obtaining written 
bids for Treasury obligations.
    The final regulations modify the record keeping requirements and 
apply those requirements to guaranteed investment contracts. One 
modification to the record keeping requirements is the elimination of 
the requirement that the bids be received in writing. The final 
regulations provide that the requirement for recording the bid is 
satisfied if the issuer or its agent makes a contemporaneous record of 
the bid, including the time and date each bid was received, and the 
identification of the person and entity submitting the bid, and keeps 
this record with the bond documents.
    The final regulations also provide that, if the terms of the 
purchase agreement deviate from the terms of the bid solicitation form 
or if a submitted bid is modified, the issuer must keep a record 
explaining the purpose of the deviation or modification and, if the 
purchase agreement price differed from the bid, how that price was 
determined. If the issuer replaces investments in the winning bid 
portfolio with other investments, the prices of the new investments are 
not protected by the safe harbor unless those investments are bid under 
a bidding procedure meeting the requirements of the final regulations.

L. Broker Fees for Yield Restricted Defeasance Escrows

    The proposed regulations provide that a fee paid to a bidding agent 
is a qualified administrative cost only if the fee is comparable to a 
fee that would be charged for a reasonably comparable investment of 
obligations acquired with a source of funds other than gross proceeds 
of tax-exempt bonds and the fee is reasonable. Under the proposed 
regulations, the fee is presumed to be reasonable if it does not exceed 
.02 percent of the amount invested in United States Treasury 
obligations. Commentators noted that the comparability requirement was 
unclear and that outside the context of municipal bonds, bidding for 
closely comparable investments is virtually non-existent. Commentators 
also noted that the .02 percent fee may result in too much compensation 
in the case of large escrows and too little compensation in the case of 
small escrows.
    The final regulations retain the comparability and reasonableness 
requirements. However, the final regulations provide that a broker's 
fee will meet the reasonableness and comparability requirements if the 
fee does not exceed the lesser of $10,000 or .1 percent of the initial 
principal amount of investments purchased for the yield restricted 
defeasance escrow.

Special Analyses

    It has been determined that this Treasury decision is not a 
significant regulatory action as defined in EO 12866. Therefore, a 
regulatory assessment is not required. It is hereby certified that 
these regulations do not have a significant economic impact on a 
substantial number of small entities. This certification is based upon 
the fact that the amount of time required to meet the record keeping 
requirement of these final regulations, an estimated annual average of 
1 hour per taxpayer, is small. Also, the regulations affect a small 
number of taxpayers, approximately 1400 annually. Therefore, a 
Regulatory Flexibility Analysis under the Regulatory Flexibility Act (5 
U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the 
Internal Revenue Code, the notice of proposed rulemaking preceding 
these regulations was submitted to the Small Business Administration 
for comment on its impact on small business.
    Drafting information. The principal authors of these regulations 
are David White and Rebecca Harrigal of the IRS Office of Chief Counsel 
and Edwin G. Oswald of the Department of the Treasury. However, other 
personnel from the IRS and the Treasury Department participated in 
their development.

[[Page 71751]]

List of Subjects

26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

26 CFR Part 602

    Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR parts 1 and 602 are amended as follows:

PART 1--INCOME TAXES

    Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 1.148-5 is amended as follows:
    1. Paragraph (d)(6)(iii) is revised.
    2. Paragraph (e)(2)(iv) is added.
    The revision and addition read as follows:


Sec. 1.148-5  Yield and valuation of investments.

* * * * *
    (d) * * *
    (6) * * *
    (iii) Safe harbor for establishing fair market value for guaranteed 
investment contracts and investments purchased for a yield restricted 
defeasance escrow. The purchase price of a guaranteed investment 
contract and the purchase price of an investment purchased for a yield 
restricted defeasance escrow will be treated as the fair market value 
of the investment on the purchase date if all of the following 
requirements are satisfied:
    (A) The issuer makes a bona fide solicitation for the purchase of 
the investment. A bona fide solicitation is a solicitation that 
satisfies all of the following requirements:
    (1) The bid specifications are in writing and are timely forwarded 
to potential providers.
    (2) The bid specifications include all material terms of the bid. A 
term is material if it may directly or indirectly affect the yield or 
the cost of the investment.
    (3) The bid specifications include a statement notifying potential 
providers that submission of a bid is a representation that the 
potential provider did not consult with any other potential provider 
about its bid, that the bid was determined without regard to any other 
formal or informal agreement that the potential provider has with the 
issuer or any other person (whether or not in connection with the bond 
issue), and that the bid is not being submitted solely as a courtesy to 
the issuer or any other person for purposes of satisfying the 
requirements of paragraph (d)(6)(iii)(B)(1) or (2) of this section.
    (4) The terms of the bid specifications are commercially 
reasonable. A term is commercially reasonable if there is a legitimate 
business purpose for the term other than to increase the purchase price 
or reduce the yield of the investment. For example, for solicitations 
of investments for a yield restricted defeasance escrow, the hold firm 
period must be no longer than the issuer reasonably requires.
    (5) For purchases of guaranteed investment contracts only, the 
terms of the solicitation take into account the issuer's reasonably 
expected deposit and drawdown schedule for the amounts to be invested.
    (6) All potential providers have an equal opportunity to bid. For 
example, no potential provider is given the opportunity to review other 
bids (i.e., a last look) before providing a bid.
    (7) At least three reasonably competitive providers are solicited 
for bids. A reasonably competitive provider is a provider that has an 
established industry reputation as a competitive provider of the type 
of investments being purchased.
    (B) The bids received by the issuer meet all of the following 
requirements:
    (1) The issuer receives at least three bids from providers that the 
issuer solicited under a bona fide solicitation meeting the 
requirements of paragraph (d)(6)(iii)(A) of this section and that do 
not have a material financial interest in the issue. A lead underwriter 
in a negotiated underwriting transaction is deemed to have a material 
financial interest in the issue until 15 days after the issue date of 
the issue. In addition, any entity acting as a financial advisor with 
respect to the purchase of the investment at the time the bid 
specifications are forwarded to potential providers has a material 
financial interest in the issue. A provider that is a related party to 
a provider that has a material financial interest in the issue is 
deemed to have a material financial interest in the issue.
    (2) At least one of the three bids described in paragraph 
(d)(6)(iii)(B)(1) of this section is from a reasonably competitive 
provider, within the meaning of paragraph (d)(6)(iii)(A)(7) of this 
section.
    (3) If the issuer uses an agent to conduct the bidding process, the 
agent did not bid to provide the investment.
    (C) The winning bid meets the following requirements:
    (1) Guaranteed investment contracts. If the investment is a 
guaranteed investment contract, the winning bid is the highest yielding 
bona fide bid (determined net of any broker's fees).
    (2) Other investments. If the investment is not a guaranteed 
investment contract, the following requirements are met:
    (i) The winning bid is the lowest cost bona fide bid (including any 
broker's fees). The lowest cost bid is either the lowest cost bid for 
the portfolio or, if the issuer compares the bids on an investment-by-
investment basis, the aggregate cost of a portfolio comprised of the 
lowest cost bid for each investment. Any payment received by the issuer 
from a provider at the time a guaranteed investment contract is 
purchased (e.g., an escrow float contract) for a yield restricted 
defeasance escrow under a bidding procedure meeting the requirements of 
this paragraph (d)(6)(iii) is taken into account in determining the 
lowest cost bid.
    (ii) The lowest cost bona fide bid (including any broker's fees) is 
not greater than the cost of the most efficient portfolio comprised 
exclusively of State and Local Government Series Securities from the 
United States Department of the Treasury, Bureau of Public Debt. The 
cost of the most efficient portfolio of State and Local Government 
Series Securities is to be determined at the time that bids are 
required to be submitted pursuant to the terms of the bid 
specifications.
    (iii) If State and Local Government Series Securities from the 
United States Department of the Treasury, Bureau of Public Debt are not 
available for purchase on the day that bids are required to be 
submitted pursuant to terms of the bid specifications because sales of 
those securities have been suspended, the cost comparison of paragraph 
(d)(6)(iii) (C)(2)(ii) of this section is not required.
    (D) The provider of the investments or the obligor on the 
guaranteed investment contract certifies the administrative costs that 
it pays (or expects to pay, if any) to third parties in connection with 
supplying the investment.
    (E) The issuer retains the following records with the bond 
documents until three years after the last outstanding bond is 
redeemed:
    (1) For purchases of guaranteed investment contracts, a copy of the 
contract, and for purchases of investments other than guaranteed 
investment contracts, the purchase agreement or confirmation.
    (2) The receipt or other record of the amount actually paid by the 
issuer for the investments, including a record of

[[Page 71752]]

any administrative costs paid by the issuer, and the certification 
under paragraph (d)(6)(iii)(D) of this section.
    (3) For each bid that is submitted, the name of the person and 
entity submitting the bid, the time and date of the bid, and the bid 
results.
    (4) The bid solicitation form and, if the terms of the purchase 
agreement or the guaranteed investment contract deviated from the bid 
solicitation form or a submitted bid is modified, a brief statement 
explaining the deviation and stating the purpose for the deviation. For 
example, if the issuer purchases a portfolio of investments for a yield 
restricted defeasance escrow and, in order to satisfy the yield 
restriction requirements of section 148, an investment in the winning 
bid is replaced with an investment with a lower yield, the issuer must 
retain a record of the substitution and how the price of the substitute 
investment was determined. If the issuer replaces an investment in the 
winning bid portfolio with another investment, the purchase price of 
the new investment is not covered by the safe harbor unless the 
investment is bid under a bidding procedure meeting the requirements of 
this paragraph (d)(6)(iii).
    (5) For purchases of investments other than guaranteed investment 
contracts, the cost of the most efficient portfolio of State and Local 
Government Series Securities, determined at the time that the bids were 
required to be submitted pursuant to the terms of the bid 
specifications.
    (e) * * *
    (2) * * *
    (iv) Special rule for investments purchased for a yield restricted 
defeasance escrow. For investments purchased for a yield restricted 
defeasance escrow, a fee paid to a bidding agent is a qualified 
administrative cost only if the following requirements are satisfied:
    (A) The fee is comparable to a fee that would be charged for a 
reasonably comparable investment if acquired with a source of funds 
other than gross proceeds of tax-exempt bonds, and it is reasonable. 
The fee is deemed to be comparable to a fee that would be charged for a 
comparable investment acquired with a source of funds other than gross 
proceeds of tax-exempt bonds, and to be reasonable if the fee does not 
exceed the lesser of $10,000 or .1% of the initial principal amount of 
investments deposited in the yield restricted defeasance escrow.
    (B) For transactions in which a guaranteed investment contract and 
other investments are purchased for a yield restricted defeasance 
escrow in a single investment (e.g., an issuer bids United States 
Treasury obligations and an escrow float contract collectively), a 
broker's fee described in paragraph (e)(2)(iv)(A) of this section will 
apply to the initial principal amount of the investment deposited in 
the yield restricted defeasance escrow, and a broker's fee described in 
paragraph (e)(2)(iii) of this section will apply only to the guaranteed 
investment contract portion of the investment.
* * * * *

PART 602--OMB CONTROL NUMBERS UNDER THE PAPERWORK REDUCTION ACT

    Par. 3. The authority citation for part 602 continues to read as 
follows:

    Authority: 26 U.S.C. 7805.

    Par. 4. In Sec. 602.101, paragraph (c) is amended by revising the 
entry for 1.148-5 in the table to read as follows:


Sec. 602.101  OMB Control numbers.

* * * * *
    (c) * * *

------------------------------------------------------------------------
                                                            Current OMB
   CFR part or section where identified and described       control No.
------------------------------------------------------------------------
 
                  *        *        *        *        *
1.148-5.................................................      1545-1098,
                                                               1545-1490
 
                  *        *        *        *        *
------------------------------------------------------------------------

    Approved: December 17, 1998.
Robert E. Wenzel,
Deputy Commissioner of Internal Revenue.

Donald C. Lubick,
Assistant Secretary of the Treasury.
[FR Doc. 98-34209 Filed 12-29-98; 8:45 am]
BILLING CODE 4830-01-U