SECTION 12. ARBITRAGE

REQUIREMENTS

Section 54(i) generally provides that a bond shall not be treated as a clean renewable energy bond unless, with respect to the issue of which the bond is a part, the qualified issuer satisfies the arbitrage requirements of section 148 with respect to proceeds of the issue. It is anticipated that the Temporary Regulations will provide that, for purposes of applying the arbitrage requirements of section 148 to bonds issued under section 54—

(1) If an issue meets the requirements of section 54(h)(1) (including the requirement that the issuer reasonably expects, as of the issue date, that at least 95 percent of the net proceeds will be expended within 5 years), then the proceeds of the issue qualify for a temporary period of 5 years beginning on the date of issuance of the issue, and any unspent proceeds after the end of such 5-year period are eligible for yield reduction payments under the principles of § 1.148–5(c);

(2) The credit allowed under section 54(a) shall be disregarded for purposes of computing the yield on the issue under § 1.148–4;

(3) Section 148(b)(3) (relating to exception to the definition of “investment property” for certain tax-exempt bonds) shall not apply;

(4) The bonds shall not be treated as private activity bonds for purposes of section 148(f)(4)(A) (relating to rebate exception for amounts in a bona fide debt service fund);

(5) Section 148(f)(4)(C) (relating to exception from rebate for certain proceeds to be used to finance construction expenditures) shall apply to the available construction proceeds of an issue; and

(6) Section 148(f)(4)(D) (relating to exception from rebate for certain small issuers) shall not apply.