SECTION 1. BACKGROUND

Some issuers of qualified student loan bonds allocated student loans made or acquired with gross proceeds to an issue of bonds (the first bond issue) and subsequently reallocated the same student loans to other issues. These reallocations were not due to a refunding of the first bond issue or the universal cap rule. The issuers did not sell, discharge, or otherwise actually dispose of the student loans. The issuers were unable to establish the bond issues to which the student loans were properly allocable as purpose investments and, as a consequence, the issuers could not establish that the bond issues involved were other than issues of arbitrage bonds.

Some of these issuers have approached the IRS about the possibility of entering into closing agreements after the discovery of these types of reallocations with respect to their qualified student loan bonds. This announcement sets forth the terms under which the IRS will enter into a voluntary

§1.263(a)–3 Amounts paid to improve tangible property .

(a) through (p) [The entries in the table of contents for the proposed amendments to §1.263(a)–3(a) through (p) are the same as the entries in the table of contents for §1.263(a)–3T(a) through (p) published elsewhere in this issue of the Bulletin].

• • • • Par. 15. Section 1.263(a)–1 is revised to read as follows:

§1.263(a)–1 Capital expenditures; in general .

[The text of the proposed amendments to §1.263(a)–1 is the same as the text of §1.263(a)–1T published elsewhere in this issue of the Bulletin].

Par. 16. Section 1.263(a)–2 is revised to read as follows:

§1.263(a)–2 Amounts paid to acquire or produce tangible property .

[The text of the proposed amendments to §1.263(a)–2 is the same as the text of §1.263(a)–2T published elsewhere in this issue of the Bulletin].

Par. 17. Section 1.263(a)–3 is revised to read as follows:

§1.263(a)–3 Amounts paid to improve tangible property .

[The text of the proposed amendments to §1.263(a)–3 is the same as the text of §1.263(a)–3T published elsewhere in this issue of the Bulletin].

Par. 18. Section 1.263(a)–6 is added to read as follows:

§1.263(a)–6 Election to deduct or capitalize certain expenditures .

[The text of the proposed amendments to §1.263(a)–6 is the same as the text of §1.263(a)–6T published elsewhere in this issue of the Bulletin].

Par. 19. Section 1.263A–1 is amended by:

1. Adding paragraph (b)(14).
2. Revising paragraph (c)(4).
3. Revising paragraph (e)(2)(i)(A).
4. Revising paragraph (e)(3)(ii)(E).
5. Revising paragraph (l).
6. Adding paragraph (m). The additions and revisions read as follows:

§1.263A–1 Uniform capitalization of costs .

• • • • (b) - - (14) [The text of the proposed amendments to §1.263A–1(b)(14) is the same as the text of §1.263A–1T(b)(14) published elsewhere in this issue of the Bulletin].
• • • • (c) - - (4) [The text of the proposed amendments to §1.263A–1(c)(4) is the same as the text of §1.263A–1T(c)(4) published elsewhere in this issue of the Bulletin].
• • • • (e) - - (2) - - (i) - - (A) [The text of the proposed amendments to §1.263A–1(e)(2)(i)(A) is the same as the text of §1.263A–1T(e)(2)(i)(A) published elsewhere in this issue of the Bulletin].
• • • • (3) - - (ii) - - (E) [The text of the proposed amendments to §1.263A–1(e)(3)(ii)(E) is the same as the text of §1.263A–1T(e)(3)(ii)(E) published elsewhere in this issue of the Bulletin].
• • • • (l) [The text of the proposed amendments to §1.263A–1(l) is the same as the text of §1.263A–1T(l) published elsewhere in this issue of the Bulletin].

(m) [The text of the proposed amendments to §1.263A–1(m) is the same as the text of §1.263A–1T(m) published elsewhere in this issue of the Bulletin].

Par. 20. Section 1.1016–3 is amended by:

1. Revising paragraphs (a)(1)(ii) and (j)(1).

2. Adding paragraph (j)(3). The addition and revision read as follows:

§1.1016–3 Exhaustion, wear and tear, obsolescence, amortization, and depletion for periods since February 13, 1913 .

(a) - - (1) - - (ii) [The text of the proposed amendments to §1.1016–3(a)(1)(ii) is the same as

April 2, 2012 721 2012–14 I.R.B.

date the Bonds are retired, reissued and/or refunded.

(F) Because this program does not arise out of an examination, consideration under this program does not preclude or impede the IRS’ examination of the Issuer, the bondholders, or the Bonds with respect to any matter not addressed in the closing agreement.

.03 An Issuer requesting a settlement under TEB VCAP must request a settlement with respect to all of the outstanding qualified student loan bond issues (1) from which it reallocated student loans made or acquired with gross proceeds of the issue to another issue other than due to the transferred proceeds or universal cap rules and (2) to which it reallocated those loans.

.04 The Issuer must submit the TEB VCAP request no later than July 31, 2012, under the operating procedures described in IRM 7.2.3.

.05 Generally, within 60 days of the receipt of a complete TEB VCAP request, the IRS will process the request and send a closing agreement to the issuer for its execution. An issuer must submit payment of the Settlement Amount, in accordance with the closing agreement, prior to returning the executed closing agreement to the IRS.