SECTION 1. PURPOSE

The purpose of this revenue procedure is to modify Rev. Proc. 80–27, 1980–1 C. B. 677, by identifying the one central location where all filers of reports required of group parents to maintain group exemptions should send the required annual reports.

not include the purchase of investments for an escrow for an advance refunding transaction.

.08 Section 1.148–2(d)(2)(ii) defines ‘‘materially higher yield’’ for investments in an advance refunding escrow as 0.001 percent higher than the yield on the issue.

.09 An issuer cannot avoid the application of § 148 by giving away the prohibited arbitrage profit. See 2 H.R. Conf. Rep. No. 841, 99th Cong., 2d Sess. II–746 (1986), 1986–3 (Vol. 4) C.B. 746. The deflection of arbitrage through the purchase of investments at other than fair market value is prohibited. H.R. Rep. No. 426, 99th Cong., 1st Sess. 556 (1985), 1986–3 (Vol. 2) C.B. 556. .10 Issuers of advance refunding bonds commonly enter into an agreement to purchase United States Treasury securities that are to be deposited into an escrow to pay the refunded prior issue of bonds. In most cases, an issuer enters into this investment purchase agreement on the same date it enters into an agreement to sell its advance refunding bonds. That date (the ‘‘sale date’’) is often several weeks before the issue date of the issue of bonds.

.11 In a typical tax-exempt advance refunding transaction, the obligation to purchase the Treasury securities is contingent on the issuance and sale of the advance refunding bonds, which in turn are commonly subject to contingencies that are standard in the municipal bond industry (such as the ability of bond counsel to render an unqualified opinion on the validity of the bonds).

.12 In general, a valuation method must take into account all pertinent information. A valuation method that singles out one economic factor and disregards other significant economic factors is erroneous. See, e.g., Powers v. Commissioner, 312 U.S. 259, 260 (1941), 1941–1 C.B. 448; Guggenheim v. Rasquin, 312 U.S. 254 (1941), 1941–1 C.B. 445; Commissioner v. Mc- Cann, 146 F.2d 385 (2d Cir. 1944).

.13 Certain state and local government issuers, and certain sellers of Treasury securities to state and local government issuers, of advance refunding bonds have used a valuation method that results in prices for those Treasury securities that exceed the fair market value of the securities. It has been asserted that the risk of nonsettlement justifies the inclusion of the cost of a hedge (such as a put option on Treasury securities) in the fair market value of the