[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)]
[Proposed Rules]
[Pages 36301-36305]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15411]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

[REG-138526-14]
RIN 1545-BM46


Issue Price Definition for Tax-Exempt Bonds

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Partial withdrawal of notice of proposed rulemaking, notice of 
proposed rulemaking, and notice of public hearing.

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SUMMARY: This document partially withdraws the portion of the notice of 
proposed rulemaking published in the Federal Register on September 16, 
2013 (78 FR 56842), relating to the definition of issue price for 
purposes of the arbitrage restrictions under section 148 of the 
Internal Revenue Code (Code). This document also contains a notice of 
proposed rulemaking that provides a revised definition of issue price 
for purposes of the arbitrage restrictions. In addition, this document 
provides notice of a public hearing on the proposed regulations in this 
document. The proposed regulations in this document affect issuers of 
tax-exempt and other tax-advantaged bonds.

DATES: Written or electronic comments must be received by September 22, 
2015. Requests to speak and outlines of topics to be discussed at the 
public hearing scheduled for October 28, 2015, at 10:00 a.m., must be 
received by September 22, 2015.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-138526-14), Internal 
Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 
20044. Submissions may be hand delivered to: CC:PA:LPD:PR Monday 
through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR 
(REG-138526-14), Courier's Desk, Internal Revenue Service, 1111 
Constitution Avenue NW, Washington, DC, or sent electronically via the 
Federal eRulemaking Portal at www.regulations.gov (IRS REG-138526-14). 
The public hearing will be held at the Internal Revenue Building, 1111 
Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, 
Lewis Bell at (202) 317-6980; concerning submissions of comments and 
the hearing, Oluwafunmilayo (Funmi) Taylor at (202) 317-6901 (not toll-
free numbers).

SUPPLEMENTARY INFORMATION: 

Paperwork Reduction Act

    The collection of information contained in Sec.  1.148-1 has been 
reviewed and approved by the Office of Management and Budget in 
accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) 
under control number 1545-1347. The collection of information in this 
proposed regulation is in Sec.  1.148-1(f)(2)(ii) which contains a 
requirement that the issuer obtain certifications and supporting 
documentation regarding the underwriter's sales of the issuer's bonds. 
The collection of information in Sec.  1.148-1(f)(2)(ii) is an increase 
in the total annual burden under control number 1545-1347. The 
respondents are issuers of tax-exempt bonds that wish to use the 
alternative method in Sec.  1.148-1(f)(2)(ii).
    Estimated total annual recordkeeping burden: 52,276 hours.
    Estimated average annual burden hours per respondent: 4 hours.
    Estimated number of respondents: 12,546.
    Estimated annual frequency of responses: 20,910.
    Comments on the collection of information should be sent 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, with copies to the Internal Revenue Service, 
Attn: IRS Reports Clearance Officer, SE:CAR:MP:T:T:SP, Washington DC 
20224. Comments on the collection of information should be received by 
August 24, 2015.
    Comments are sought on whether the proposed collection of 
information is necessary for the proper performance of the IRS, 
including whether the information will have practical utility;
    The accuracy of the estimated burden associated with the proposed 
collection of information;
    How the quality, utility, and clarity of the information to be 
collected may be enhanced;
    How the burden of complying with the proposed collection of 
information may be minimized, including through the application of 
automated collection techniques and other forms of information 
technology; and
    Estimates of capital or start-up costs and costs of operation, 
maintenance,

[[Page 36302]]

and purchase of service to provide information.
    An agency may not conduct or sponsor, and a person is not required 
to respond to, a collection of information unless it displays a valid 
control number assigned by the Office of Management and Budget.
    Books or records relating to a 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 section 6103.

Background

    This document contains proposed amendments to the Income Tax 
Regulations (26 CFR part 1) on the arbitrage investment restrictions 
under section 148 of the Code. On June 18, 1993, the Department of the 
Treasury (Treasury Department) and the IRS published comprehensive 
final regulations in the Federal Register (TD 8476, 58 FR 33510) on the 
arbitrage investment restrictions and related provisions for tax-exempt 
bonds under sections 103, 148, 149, and 150. Since that time, those 
final regulations have been amended in certain limited respects (the 
regulations issued in 1993 and the amendments thereto are collectively 
referred to as the Existing Regulations).
    A notice of proposed rulemaking was published in the Federal 
Register (78 FR 56842; REG-148659-07) on September 16, 2013 (the 2013 
Proposed Regulations), which proposes amendments to the Existing 
Regulations to address market developments, simplify certain 
provisions, address certain technical issues, and make the regulations 
more administrable. One significant change in the 2013 Proposed 
Regulations addresses the definition of issue price. Comments were 
received, and a public hearing was held on February 5, 2014. After 
considering the comments and the statements made at the public hearing, 
the Treasury Department and the IRS have decided to withdraw Sec.  
1.148-1(f) of the 2013 Proposed Regulations relating to issue price and 
to propose new regulations. This document (the Proposed Regulations) 
contains the re-proposed definition of issue price. The Treasury 
Department and the IRS will address the remaining provisions contained 
in the 2013 Proposed Regulations at a later time.

Explanation of Provisions

    For purposes of the arbitrage investment restrictions, section 
148(h) provides that yield on an issue is to be determined on the basis 
of the issue price (within the meaning of sections 1273 and 1274). The 
reason for using issue price (rather than sales proceeds less the costs 
of issuance) to determine yield for purposes of section 148(h) is to 
ensure that issuers bear the costs of issuance, rather than recover 
these costs through arbitrage profits. See H. Rep. No. 99-426, at 517 
(1985). Congress thought that this requirement would encourage issuers 
to scrutinize costs of issuance more closely and would encourage better 
targeting of the federal subsidy associated with tax-exempt bonds. Id., 
at 517-518. The issue price definition under the Existing Regulations 
generally follows the issue price definition used for computing 
original issue discount on debt instruments under sections 1273 and 
1274, with certain modifications. The definition under the Existing 
Regulations provides that generally the issue price of bonds that are 
publicly offered is the first price at which a substantial amount of 
the bonds is sold to the public. However, the issue price definition in 
the Existing Regulations defines substantial amount as ten percent and 
applies a reasonable expectations standard (rather than a standard 
based on actual sales) for determining the issue price of bonds that 
are publicly offered. Specifically, the issue price of bonds for which 
a bona fide public offering is made is determined as of the sale date 
based on reasonable expectations regarding the initial offering price. 
The issue prices of bonds with different payment and credit terms are 
determined separately. Notice 2010-35, published May 10, 2010 (2010-19 
IRB 660), provides that the arbitrage definition of issue price also 
applies to other tax-advantaged bond programs, including Build America 
Bonds under section 54AA and other Qualified Tax Credit Bonds under 
section 54A.
    The definition of issue price in the 2013 Proposed Regulations 
differs significantly from that in the Existing Regulations. Consistent 
with section 148(h), the 2013 Proposed Regulations retain the rule that 
issue price generally will be determined under the rules of sections 
1273 and 1274. The 2013 Proposed Regulations parallel the language in 
the existing section 1273 regulations by providing that the issue price 
of tax-exempt bonds issued for money is the first price at which a 
substantial amount of the bonds is sold to the public. The 2013 
Proposed Regulations provide a safe harbor under which an issuer may 
treat the first price at which a minimum of 25 percent of the bonds in 
an issue (with the same credit and payment terms) actually is sold to 
the public as the issue price, provided that all orders at this price 
received from the public during the offering period are filled (to the 
extent that the public orders at such price do not exceed the amount of 
bonds sold). Thus, the 2013 Proposed Regulations base the determination 
of issue price on actual sales prices instead of reasonably expected 
sales at initial public offering prices. The 2013 Proposed Regulations 
also remove the definition of a ``substantial amount'' as ten percent.
    The 2013 Proposed Regulations define the term ``public'' to mean 
any person other than an ``underwriter.'' The 2013 Proposed Regulations 
define the term ``underwriter'' to mean any person that purchases bonds 
from the issuer for the purpose of effecting the original distribution 
of the bonds or otherwise participates directly or indirectly in the 
original distribution. An underwriter includes a lead underwriter and 
any member of a syndicate that contractually agrees to participate in 
the underwriting of the bonds for the issuer. A securities dealer 
(whether or not a member of the issuer's underwriting syndicate) that 
purchases bonds (whether or not from the issuer) for the purpose of 
effecting the original distribution of the bonds is also treated as an 
underwriter for this purpose. An underwriter generally includes a party 
related to an underwriter. A person that holds bonds for investment is 
not an underwriter with respect to those bonds.
    A number of comments were received on the 2013 Proposed Regulations 
issue price definition. In general, the commenters requested the 
withdrawal of the portion of the 2013 Proposed Regulations relating to 
the definition or the re-proposal of the definition using the existing 
reasonable expectations test regarding the initial public offering 
price, with certain clarifications. Commenters pointed out that issue 
price must be determined as of the sale date to provide certainty that 
the bonds will qualify as tax-exempt and meet state or local 
requirements for debt issuance. The sale date is the date when the 
syndicate or sole underwriter in contractual privity with the issuer 
signs the agreement to buy the bonds from the issuer and when the terms 
of the bond issue are set. Commenters expressed concern about 
insufficient sales of bonds preventing a timely determination of issue 
price on the sale date. The commenters noted that the syndicate or sole 
underwriter in contractual privity purchases the bonds from the issuer, 
so the syndicate or sole

[[Page 36303]]

underwriter, rather than the issuer, will bear the risk of any market 
fluctuations after the sale date. Because the issuer neither bears this 
risk nor receives any further proceeds, any later change in price is 
not a factor that affects the costs of issuance paid by the issuer. In 
addition, later sales prices could reflect changes in the market, 
whereas the purpose of using issue price is to preclude recovery of 
issuance costs through arbitrage profits. See H. Rep. No. 99-426, at 
517.
    In general, the lower the issue price for the bonds bearing a 
stated interest rate, the higher the yield. Economically, the issuer 
should want to receive the highest price for the bonds and pay the 
lowest yield. This aligns with the purpose of the arbitrage provisions 
to minimize arbitrage investment benefits and remove incentives to 
issue more tax-exempt bonds, and thus to limit the federal revenue cost 
of the tax subsidy for tax-exempt bonds. Many of the commenters stated, 
however, that the use of actual sales prices likely would result in 
lower bond offering prices so as to ensure that each issue would meet 
the 25 percent threshold in the safe harbor in the 2013 Proposed 
Regulations as of the sale date of the bonds. The commenters pointed to 
unsold bonds in particular maturities of an overall tax-exempt bond 
issue that includes a series of bonds with separate maturities and 
issue prices as the particular impediment to meeting an actual sale 
requirement as of the sale date. These lower bond prices would reduce 
proceeds and increase borrowing costs for issuers, increase bond yields 
for arbitrage purposes, and increase federal tax subsidies.
    In addition, commenters suggested that the definition of 
underwriter in the 2013 Proposed Regulations was unduly broad and 
ambiguous. In particular, commenters expressed concern that the 2013 
Proposed Regulations effectively required the issuer to obtain price 
information from dealers that are not in a contractual relationship 
with the issuer or underwriting syndicate. The commenters also 
expressed concern that the proposed definition of underwriter 
necessitated determining a dealer's intent for buying bonds because 
whether a dealer was an underwriter depended upon whether the dealer 
purchased bonds with ``the purpose of effecting the original 
distribution of the bonds.''
    In response to the comments received, the Treasury Department and 
the IRS are re-proposing an amended definition of issue price for tax-
exempt bonds. Consistent with section 148(h), the Proposed Regulations 
retain the rule that issue price generally will be determined under the 
rules of sections 1273 and 1274. The Proposed Regulations also parallel 
the language in the existing section 1273 regulations and the Existing 
Regulations by providing that the issue price of bonds issued for money 
is the first price at which a substantial amount of the bonds is sold 
to the public. This rule uses actual sales to determine issue price and 
is consistent with section 1273. The Proposed Regulations retain the 
rule in the Existing Regulations that ten percent is a substantial 
amount.
    The Proposed Regulations also retain the rule for tax-exempt bonds 
that the issue prices of bonds with different payment and credit terms 
are determined separately. Tax-exempt bond issues often include bonds 
with different payment and credit terms that generally sell at 
different prices. In response to commenters' concerns regarding the 
need for certainty with respect to the determination of issue price of 
the issue as of the sale date and that less than a substantial amount 
of particular bonds included within an issue may be sold by that time, 
the Proposed Regulations provide an alternative method of determining 
issue price for bonds a substantial amount of which is not sold 
pursuant to orders received from the public as of the sale date. Under 
this alternative method, an issuer may treat the initial offering price 
to the public as the issue price, provided certain requirements are 
met.
    In particular, the alternative method requires that the 
underwriters fill all orders at the initial offering price placed by 
the public and received by the underwriters on or before the sale date 
(to the extent the orders do not exceed the amount of bonds to be sold) 
and do not fill any order received by the underwriters on or before the 
sale date at a price higher than the initial offering price. Further, 
the alternative method requires the lead underwriter (or sole 
underwriter, if applicable) to provide certification with respect to 
certain matters under the alternative method, including a certification 
that no underwriter will fill an order received from the public after 
the sale date and before the issue date at a price higher than the 
initial offering price, except if the higher price is the result of a 
market change for those bonds after the sale date (for example, due to 
a change in interest rates), and that it will provide the issuer with 
supporting documentation for the matters covered by the certifications.
    Documentation of the initial offering price may include a copy of 
the pricing wire (or equivalent communication). Documentation of bonds 
for which an underwriter filled an order placed by the public after the 
sale date and before the issue date at a price higher than the initial 
offering price includes both pricing information (amounts, prices, and 
sale dates) and information regarding the corresponding market change, 
such as proof of the values of a broad-based index of municipal bond 
interest rates on bonds similar to the type and credit rating of the 
bonds being sold. The issuer must not know or have reason to know, 
after exercising due diligence, that the certifications are false.
    The Treasury Department and the IRS recognize that, under syndicate 
agreements among underwriters and MSRB rules, underwriters are free to 
sell bonds after the bond purchase agreement is signed at a fair and 
reasonable price different from the initial offering price. The 
alternative method allows the use of initial offering price as the 
issue price in circumstances in which bonds are sold after the sale 
date and before the issue date at a higher price, provided that the 
higher price results from a market change for those bonds after the 
sale date. Based on available data, the Treasury Department and the IRS 
believe that the frequency of sales by underwriters at higher prices 
between the sale date and the issue date is limited. Thus, the burden, 
in effect, of requiring underwriters to maintain initial public 
offering prices for unsold bonds until the issue date absent 
justification for higher prices based on market changes should be 
limited. The Treasury Department and the IRS request comments on other 
safeguards or alternative approaches to ensure that the prices obtained 
by underwriters in actual sales of bonds to the public between the sale 
date and the issue date are consistent with use of initial offering 
prices to the public as of the sale date as a simplifying assumption 
for issue price determinations in the alternative method.
    The Proposed Regulations define ``public'' for purposes of 
determining the issue price of tax-exempt bonds as any person other 
than an underwriter or a related party to an underwriter. The Proposed 
Regulations define ``underwriter'' to include (i) any person that 
contractually agrees to participate in the initial sale of the bonds to 
the public by entering into a contract with the issuer or into a 
contract with a lead underwriter to form an underwriting syndicate and 
(ii) any person that, on or before the sale date, directly or 
indirectly enters into a contract or other arrangement to sell the 
bonds with any of the foregoing (for example, a retail

[[Page 36304]]

distribution contract between a member of an underwriting syndicate or 
selling group and another dealer that is not in the syndicate or 
selling group).
    The Proposed Regulations remove as unnecessary a rule in the 
Existing Regulations expressly stating that the issue price does not 
change if part of the issue is later sold at a different price. The 
Treasury Department and the IRS intend no substantive change by the 
removal.
    In accordance with section 6001, the issuer should maintain 
documentation in its books and records to support its issue price 
determinations. This documentation includes the specific certifications 
and documentation required to determine issue price under the 
alternative method, as well as documentation to support issue price 
determinations under the general rule. For example, under the general 
rule, an issuer should include in its books and records any 
certification from the lead (or sole) underwriter regarding the first 
price at which a substantial amount of the bonds were sold to the 
public and reasonable supporting documentation for this price.

Proposed Effective/Applicability Date

    The Proposed Regulations are proposed to apply prospectively to 
bonds that are sold on or after the date that is 90 days after 
publication of the Treasury decision adopting these rules as final 
regulations in the Federal Register. In addition, issuers may rely upon 
the Proposed Regulations with respect to bonds that are sold on or 
after June 24, 2015, and before the date that is 90 days after 
publication of the Treasury decision adopting these rules as final 
regulations in the Federal Register.

Special Analyses

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in Executive Order 
12866, as supplemented by Executive Order 13563. Therefore, a 
regulatory assessment is not required. It has also been determined that 
section 553(b) of the Administrative Procedure Act (5 U.S.C. Chapter 5) 
does not apply.
    It is hereby certified that these Proposed Regulations, if adopted, 
would not have a significant economic impact on a substantial number of 
small entities. Therefore, a Regulatory Flexibility Analysis under the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) is not required. This 
certification is based generally on the fact that any effect on small 
entities by these rules generally flows from section 148 of the Code.
    Section 148(h) of the Code requires the yield on an issue of bonds 
to be determined on the basis of issue price (within the meaning of 
sections 1273 and 1274). Under section 1273, the issue price is the 
first price at which a substantial amount of the bonds were sold to the 
public. Section 1.148-1(f)(2)(ii) of the Proposed Regulations gives 
effect to the statute by requiring the issuer to obtain certifications 
and documentation regarding sales of the bonds from the underwriter of 
the bonds, which is the party that sells the bonds to the public. This 
information will be used to support the issue price of the bonds for 
audit and other purposes. Any economic impact of obtaining this 
information is minimal because most of the information already is 
provided to issuers by the underwriters under existing industry 
practices. Accordingly, these proposed changes do not add to the impact 
on small entities imposed by the statutory provision. Pursuant to 
section 7805(f) of the Code, this notice of proposed rulemaking has 
been submitted to the Chief Counsel for Advocacy of the Small Business 
Administration for comment on its impact on small business.

Comments and Public Hearing

    Before these Proposed Regulations are adopted as final regulations, 
consideration will be given to any comments that are submitted timely 
to the IRS as prescribed in this preamble under the ``Addresses'' 
heading. The IRS and the Treasury Department request comments on all 
aspects of the proposed rules. All comments that are submitted by the 
public will be available for public inspection and copying at 
www.regulations.gov or upon request.
    A public hearing has been scheduled for October 28, 2015, at 10:00 
a.m., in the IRS Auditorium, Internal Revenue Service, 1111 
Constitution Avenue NW., Washington, DC. Due to building security 
procedures, visitors must enter at the Constitution Avenue entrance. In 
addition, all visitors must present photo identification to enter the 
building. Because of access restrictions, visitors will not be admitted 
beyond the immediate entrance area more than 15 minutes before the 
hearing starts. For more information about having your name placed on 
the building access list to attend the hearing, see the FOR FURTHER 
INFORMATION CONTACT section of this preamble.
    The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons who 
wish to present oral comments at the hearing must submit written or 
electronic comments and an outline of the topics to be discussed and 
the time to be devoted to each topic by September 22, 2015. Such 
persons should submit a signed paper original and eight (8) copies or 
an electronic copy. A period of 10 minutes will be allotted to each 
person for making comments. An agenda showing the scheduling of the 
speakers will be prepared after the deadline for receiving outlines has 
passed. Copies of the agenda will be available free of charge at the 
hearing.

Drafting Information

    The principal authors of these regulations are Johanna Som de Cerff 
and Lewis Bell, Office of Associate Chief Counsel (Financial 
Institutions and Products), IRS. However, other personnel from the IRS 
and the Treasury Department participated in their development.

List of Subjects in 26 CFR Part 1

    Income taxes, Reporting and recordkeeping requirements.

Partial Withdrawal of Notice of Proposed Rulemaking

    Accordingly, under the authority of 26 U.S.C. 7805, Sec.  1.148-
1(f) of the notice of proposed rulemaking (REG-148659-07) that was 
published in the Federal Register on September 16, 2013 (78 FR 56842), 
is withdrawn.

Proposed Amendments to the Regulations

    Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1--INCOME TAXES

0
Paragraph 1. The authority citation for part 1 continues to read in 
part as follows:

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

0
Par. 2. Section 1.148-0(c) is amended by adding entries for Sec. Sec.  
1.148-1(f) and 1.148-11(m) to read as follows:


Sec.  1.148-0  Scope and table of contents.

* * * * *
    (c) Table of contents. * * *


Sec.  1.148-1  Definitions and elections.

* * * * *
    (f) Definition of issue price.
    (1) In general.
    (2) Bonds issued for money.
    (3) Definitions.
    (4) Special rules.
* * * * *


Sec.  1.148-11  Effective/applicability dates.

* * * * *
    (m) Definition of issue price.

[[Page 36305]]

0
Par. 3. Section 1.148-1 is amended by revising the definition of issue 
price in paragraph (b) and adding paragraph (f) to read as follows:


Sec.  1.148-1  Definitions and elections.

* * * * *
    (b) * * *
    Issue price means issue price as defined in paragraph (f) of this 
section.
* * * * *
    (f) Definition of issue price--(1) In general. Except as otherwise 
provided in this paragraph (f), issue price is defined in sections 1273 
and 1274 and the regulations under those sections.
    (2) Bonds issued for money--(i) In general. The issue price of 
bonds issued for money is the first price at which a substantial amount 
of the bonds is sold to the public.
    (ii) Alternative method based on initial offering price. As an 
alternative to the general rule in paragraph (f)(2)(i) of this section, 
if the underwriters have not received orders placed by the public for a 
substantial amount of tax-exempt bonds on or before the sale date, the 
issuer may treat the initial offering price to the public as the issue 
price of the bonds if all of the following requirements are met:
    (A) The underwriters fill all orders at the initial offering price 
placed by the public and received by the underwriters on or before the 
sale date (to the extent the orders do not exceed the amount of bonds 
to be sold), and no underwriter fills an order placed by the public and 
received by the underwriters on or before the sale date at a price 
higher than the initial offering price.
    (B) The issuer obtains from the lead underwriter in the 
underwriting syndicate or selling group (or, if applicable, the sole 
underwriter) certification of the following:
    (1) The initial offering price;
    (2) That the underwriters met the requirements of paragraph 
(f)(2)(ii)(A) of this section;
    (3) That no underwriter will fill an order placed by the public and 
received after the sale date and before the issue date at a price 
higher than the initial offering price, except if the higher price is 
the result of a market change (such as a decline in interest rates) for 
those bonds after the sale date; and
    (4) That the lead (or sole) underwriter will provide the issuer 
supporting documentation for the matters covered by the certifications 
in paragraphs (f)(2)(ii)(B)(1) and (2) of this section and, with regard 
to paragraph (f)(2)(ii)(B)(3) of this section, either documentation 
regarding any bonds for which an underwriter filled an order placed by 
the public and received after the sale date and before the issue date 
at a price higher than the initial offering price and the corresponding 
market change for those bonds, or a certification that no underwriter 
filled such orders at a price higher than the initial offering price.
    (C) The issuer does not know or have reason to know, after 
exercising due diligence, that the certifications described in 
paragraph (f)(2)(ii)(B) of this section are false.
    (3) Definitions. For purposes of this paragraph (f), the following 
definitions apply:
    (i) Public. Public means any person (as defined in section 
7701(a)(1)) other than an underwriter or a related party (as defined in 
Sec.  1.150-1(b)) to an underwriter.
    (ii) Underwriter. The term underwriter include--
    (A) Any person (as defined in section 7701(a)(1)) that 
contractually agrees to participate in the initial sale of the bonds to 
the public by entering into a contract with the issuer (or with the 
lead underwriter to form an underwriting syndicate); and
    (B) Any person that, on or before the sale date, directly or 
indirectly enters into a contract or other arrangement with a person 
described in paragraph (f)(3)(ii)(A) of this section to sell the bonds.
    (4) Special rules. For purposes of this paragraph (f), the 
following special rules apply:
    (i) Separate determinations. The issue price of bonds in an issue 
that do not have the same credit and payment terms is determined 
separately.
    (ii) Substantial amount. Ten percent is a substantial amount.
    (iii) Bonds issued for property. If a bond is issued for property, 
the adjusted applicable Federal rate, as determined under section 1288, 
is used in lieu of the applicable Federal rate to determine the bond's 
issue price under section 1274.
0
Par. 4. Section 1.148-11 is amended by adding paragraph (m) to read as 
follows:


Sec.  1.148-11  Effective/applicability dates.

* * * * *
    (m) Definition of issue price. The definition of issue price in 
Sec.  1.148-1(b) and (f) applies to bonds that are sold on or after the 
date that is 90 days after the date of publication of the Treasury 
decision adopting these rules as final regulations in the Federal 
Register.

 John M. Dalrymple,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2015-15411 Filed 6-23-15; 8:45 am]
 BILLING CODE 4830-01-P