SECTION 2. BACKGROUND

1. The Tax Reform Act of 1986, 1986–3 (Vol. 1) C.B. 1, 567, amended and reorganized the sections of the 1954 Code pertaining to information reporting for certain state or local bonds. Former section 103(l), pertaining to information reporting for private purpose bonds, and former section 103A(j)(3)(A), pertaining to information reporting for qualified mortgage bonds, were consolidated in section 149(e) of the 1986 Code, which requires information reporting for any state or local bond.

2. Section 103(a) of the 1986 Code provides that, with certain exceptions, gross income does not include interest on any state or local bond.

3. Rev. Proc. 88–10, 1988–1 C.B. 635, provided guidance to issuers of state or local bonds for requesting an extension of time to file the statement of information required by section 149(e) of the 1986 Code.

4. Section 149(e)(1) of the 1986 Code provides that interest on a state or local bond will not be excludable from gross income unless certain information reporting requirements are satisfied. The issuer must submit a statement that contains the information required under section 149(e)(2). The statement must be submitted not later than the 15th day of the 2nd calendar month after the close of the calendar quarter in which the bond is issued (or such later time as the Secretary may prescribe with respect to any portion of the statement).

5. In general, the statement required by section 149(e)(2) of the 1986 Code must be filed on one of the following forms: Form

8038, Information Return for Tax-Exempt Private Activity Bond Issues ; Form 8038–G, Information Return for Tax-Exempt Gov- ernmental Obligations ; or Form 8038– GC, Information Return for Small Tax- Exempt Governmental Bond Issues, Leases, and Installment Sales .

6. Section 1.149(e)–1(d)(2)(ii) of the Income Tax Regulations provides that the Commissioner may grant an extension of time to file any form or attachment required under section 149(e) if the Commissioner determines that the failure to file in a timely manner was not due to willful neglect. The Commissioner may make this determination with respect to an issue or a class of issues.