Section 846.—Discounted Unpaid Losses Defined

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of October 2003. See Rev. Rul. 2003-107, page 815.

is a customer that purchases natural gas or electricity, as applicable, other than for resale.

(E) Commodity swaps . A prepayment does not fail to meet the requirements of this paragraph (e)(2)(iii) by reason of any commodity swap contract that may be entered into between the issuer and an unrelated party (other than the gas or electricity supplier), or between the gas or electricity supplier and an unrelated party (other than the issuer), so long as each swap contract is an independent contract. A swap contract is an independent contract if the obligation of each party to perform under the swap contract is not dependent on performance by any person (other than the other party to the swap contract) under another contract (for example, a gas or electricity supply contract or another swap contract); provided, however, that a commodity swap contract will not fail to be an independent contract solely because the swap contract may terminate in the event of a failure of a gas or electricity supplier to deliver gas or electricity for which the swap contract is a hedge.

(F) Remedial action . Issuers may apply principles similar to the rules of §1.141–12, including §1.141–12(d) (relating to redemption or defeasance of nonqualified bonds) and §1.141–12(e) (relating to alternative use of disposition proceeds), to cure a violation of paragraph (e)(2)(iii)(A)( 2 ) or (e)(2)(iii)(B)( 2 ) of this section. For this purpose, the amount of nonqualified bonds is determined in the same manner as for output contracts taken into account under the private business tests, including the principles of §1.141–7(d), treating nonqualified sales of gas or electricity under this paragraph (e)(2)(iii) as satisfying the benefits and burdens test under §1.141–7(c)(1).

(iv) Additional prepayments as permit- ted by the Commissioner . The Commissioner may, by published guidance, set forth additional circumstances in which a prepayment does not give rise to investment-type property.

• • • • Par. 7. Section 1.148–11 is amended by adding paragraph (j) to read as follows:

§1.148–11 Effective dates.

• • • • (j) Certain prepayments . Section 1.148–1(e)(1) and (2) apply to bonds sold on or after October 3, 2003. Issuers may apply §1.148–1(e)(1) and (2), in whole but not in part, to bonds sold before October 3, 2003, that are subject to §1.148–1.

Dale F. Hart, Acting Deputy Commissioner for

Services and Enforcement .

Approved July 25, 2003.

Pamela F. Olson, Assistant Secretary of the Treasury .

(Filed by the Office of the Federal Register on August 1, 2003, 8:45 a.m., and published in the issue of the Federal Register for August 4, 2003, 68 F.R. 45772)