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SECTION 2. BACKGROUND
Internal Revenue Bulletin 1998-3 · 2026-10-03 edition · updated 2026-10-04 · United States
Section 226 of the Tax Relief Act of 1997, Pub. L. 105–34, 111 Stat. 788
January 20, 1998 56 1998–3 I.R.B.
(1997), added § 1397E to the Internal Revenue Code to provide a credit to holders of Bonds under certain circumstances so that the Bonds generally can be issued without discount or interest. Ninety-five percent of Bond proceeds are to be used for qualified purposes, as defined by § 1397E(d)(5), with respect to a qualified zone academy, as defined by § 1397E(d)(4).
The aggregate amount of Bonds that may be issued for the States is limited to $400 million for 1998 and $400 million for 1999 (the “national limitation”). This amount is to be allocated among the
States by the Secretary on the basis of their respective populations below the poverty level (as defined by the Office of Management and Budget). This amount is further allocated by the State to qualified zone academies within the State or possession. A State may carry forward to the next calendar year any amount of an allocation of the national limitation for a calendar year that is in excess of the amount of Bonds issued during that calendar year that are designated with respect to qualified academies within the State.
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