SECTION 2. BACKGROUND

.01 Under § 103(a), except as provided in § 103(b), gross income does not include interest on any state or local bond. Section 103(b) provides, in part, that § 103(a) shall not apply to any private activity bond that is not a qualified bond (within the meaning of § 141). Section 141(e) provides, in part, that a qualified bond must meet the applicable requirements of § 146.

.02 Section 146(a) provides that a private activity bond issued as part of an issue meets the requirements of § 146 if the aggregate face amount of the private activity bonds issued pursuant to such issue, when added to the aggregate face amount of tax-exempt private activity bonds previously issued by the issuing authority during the calendar year, does not exceed the authority’s volume cap for such calendar year.

.03 Section 146(f)(1) provides that if an issuing authority’s volume cap for any calendar year after 1985 exceeds the aggregate amount of tax-exempt private activity bonds the authority issued during such calendar year, such issuing authority may

elect to treat all (or any portion) of such excess as a carryforward.

.04 Section 146(f)(2) provides that, in making an election under § 146(f)(1), an issuing authority must identify one or more carryforward purposes described in § 146(f)(5) and specify the portion of the excess that is to be carried forward for each such purpose.

.05 Section 146(f)(4) provides that any carryforward election (and any identification or specification contained therein), once made, shall be irrevocable.

.06 Section 1.103(n)–4T, A–2(i), of the temporary Income Tax Regulations (together with § 1301(b) of the Tax Reform Act of 1986 (the “1986 Act”) 1986–3 (Vol. 1) C.B. 1, 520, see H.R. Conf. Rep. 99–841, at II–740 (1986), 1986–3 (Vol. 4) C.B. 740) provides that the carryforward election shall be made by means of a statement, signed by an authorized public official responsible for making allocations of the issuing authority’s volume cap, that the issuing authority elects to carry forward its unused volume cap.

.07 Section 1.103(n)–4T, A–2(ii) (together with § 1301(b) of the 1986 Act), requires that the carryforward election provide the following information:

(A) The name, address, and TIN of the issuing authority;

(B) The issuing authority's volume cap for the calendar year;

(C) The aggregate amount of volume cap used by the issuing authority during the calendar year for which the election is being made;

(D) The unused volume cap of the issuing authority; and

(E) The purposes for the carryforward and the amount to be carried forward for each such carryforward purpose.

.08 Announcement 87–43, 1987–19 I.R.B. 15, provides that Form 8328 should be used by issuers of tax-exempt bonds who wish to make the carryforward election under § 146(f). See also Announcement 85–2, 1985–1 I.R.B. 42 (announcing the development of Form 8328 for carryforward elections under § 103(n) of the Internal Revenue Code of 1954).

.09 Notice 89–12, 1989–1 C.B. 633, provides that the issuing authority must file the carryforward election by the earlier of (1) February 15 of the calendar year following the year in which the excess amount arises or (2) the date of issue

2003-28 I.R.B. 54 July 14, 2003

(2) The issuing authority's volume cap for the calendar year;

(3) The aggregate amount of volume cap for the calendar year used by the issuing authority during the calendar year;

(4) The unused volume cap of the issuing authority for the calendar year (determined by subtracting (3) of this § 4 from (2) of this § 4); and

(5) The purpose(s) for the issuing authority’s carryforward and the amount to be carried forward for each such carryforward purpose.