Safe Harbor Under Which an Issue of Tax or
Revenue Anticipation Bonds Will Not Be Treated as
Outstanding Longer Than Is Reasonably Necessary
to Accomplish the Governmental Purposes of the Bonds
for Purposes of § 1.148–10(a)(4)

Part III - Administrative, Procedural, and Miscellaneous

Notice 2001-49

Safe Harbor Under Which an Issue of Tax or Revenue Anticipation
Bonds Will Not Be Treated as Outstanding Longer Than Is Reasonably
Necessary to Accomplish the Governmental Purposes of the Bonds for
Purposes of § 1.148–10(a)(4) of the Income Tax Regulations

Recent Internal Revenue Service examinations have identified a lack
of clarity in regulations concerning when tax or revenue
anticipation bonds will be treated as outstanding longer than is
reasonably necessary to accomplish the governmental purposes of the
bonds for purposes of § 1.148-10(a)(4) of the Income Tax
Regulations. Because of this lack of clarity in the regulations, the
Internal Revenue Service announces that the issue of whether a tax
or revenue anticipation bond is outstanding longer than necessary
for purposes § 1.148-10(a)(4) will be closed in any current
examination, and will not be raised in any future examination, with
respect to any issue of tax or revenue anticipation bonds that has a
term of 2 years or less and was sold prior to August 3, 2001. This
announcement has no effect on any other issue that may be identified
in any current or future examination.

In addition, the Internal Revenue Service has determined that it is
appropriate to provide a prospective safe harbor regarding the term
of tax or revenue anticipation bonds. Therefore, attached is a
proposed revenue procedure that sets forth a safe harbor under which
an issue of tax or revenue anticipation bonds will not be treated as
outstanding longer than is reasonably necessary to accomplish the
governmental purposes of the bonds for purposes of §
1.148-10(a)(4).

Section 3 of the proposed revenue procedure provides that the safe
harbor applies to an issue of tax or revenue anticipation bonds the
proceeds of which qualify for a temporary period for restricted
working capital expenditures under § 1.148-2(e)(3). Section 4
of the proposed revenue procedure provides that, for purposes of
§ 1.148- 10(a)(4), an issue of tax or revenue anticipation
bonds will not be treated as outstanding longer than is reasonably
necessary to accomplish the governmental purposes of those bonds if
the final maturity date of the issue is not later than the end of
the applicable temporary period under § 1.148-2(e)(3)(i) or
§ 1.148-2(e)(3)(ii) for which proceeds of the issue
qualify..The proposed revenue procedure will apply to bonds sold
after the date the revenue procedure is published in the Internal
Revenue Bulletin in final form. However, issuers may rely on the
proposed revenue procedure with respect to any issue of tax or
revenue anticipation bonds that is sold before the effective date of
the proposed revenue procedure and on or after August 3, 2001.

Comments are requested on the proposed revenue procedure. Comments
may be submitted on or before November 18, 2001, to Internal Revenue
Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20224,
Attn: CC:ITA:RU (Notice 2001-49), Room 5226. Submissions may also be
hand delivered Monday through Friday between the hours of 8 a.m. and
5 p.m. to the Courier's Desk at 1111 Constitution Avenue, NW,
Washington, DC 20224, Attn: CC:ITA:RU (Notice 2001-49), Room 5226.
Submissions may also be sent electronically via the Internet to the
following e-mail address: [email protected].

The principal authors of this notice are Rose M. Weber and Timothy
L. Jones of the Office of Division Counsel/Associate Chief Counsel
(Tax Exempt and Government Entities). However, other personnel from
the IRS and Treasury Department participated in the development of
this notice. For further information regarding this notice contact
either Rose M. Weber or Timothy L. Jones at (202) 622-3980 (not a
toll-free call).

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