SECTION 3. DESCRIPTION OF THE

CLOSING AGREEMENT PROGRAM FOR SUBSEQUENT ACTIONS

.01 Under the program established by this revenue procedure, the Service will enter into closing agreements with issuers of state or local bonds. These closing agreements will provide that (1) the interest on bonds will not be includible in gross income of bondholders or (2) the interest on bonds will not be treated as an item of tax preference for purposes of the alternative minimum tax for bondholders, in each case solely as a result of an action subsequent to the issue date that causes those bonds to fail to meet certain requirements of §§ 141 through 150 of the 1986 Code relating to use of bond proceeds. The closing agreements will not resolve any other matter.

.02 In general, in the case of a closing agreement providing that the interest on bonds will not be includible in gross income of bondholders, the closing agreement will apply only to the period between the issue date of the bonds and the next date on which the bonds may be redeemed under their terms after the date of the closing agreement (the ‘‘next redemption date’’). The next redemption date will be specified in the closing agreement.

.03 In general, in the case of a closing agreement providing that the interest on bonds will not be treated as an item of tax preference for purposes of the alternative minimum tax, the closing agreement will apply only to the period between the date of the subsequent action and the date specified in the closing agreement.

.04 This program is a compliance program but is not based upon an examination of an issue of bonds by the Service.

.05 Because this program does not arise out of an examination, consideration under this program does not preclude or impede an examination of the issuer, the bondholders, or the issue of bonds by the Service with respect to matters not addressed in the closing agreement.

.06 The intent underlying this program is to treat expeditiously all requests for closing agreements which are submitted in accordance with sections 5 and 6 of this revenue procedure. Accordingly, negotiations with issuers on the basis of mitigating circumstances of individual cases will not be entertained under the terms of this revenue procedure.