Revision and clarification of the treatment of refunding issues

(a) In general Subparagraph (A) of section 146(i)(6) of the Internal Revenue Code of 1986 is amended to read as follows: (A) In general During the 12-month period beginning on the date of a repayment of a loan financed by an issue 95 percent or more of the net proceeds of which are used to provide projects described in section 142(d), if such repayment is used to provide a new loan for any project described in section 142(a)(7) or for any purpose described in subsection (a)(2)(A) or (b) of section 143, any bond which is issued to refinance such issue shall be treated as a refunding issue. Any issue treated as a refunding issue by reason of the preceding sentence shall be so treated only to the extent the principal amount of such refunding issue does not exceed the principal amount of the bonds refunded.. (b) Removal of one-Refunding limit Subparagraph (B) of section 146(i)(6) of the Internal Revenue Code of 1986 is amended— (1) by striking 4 years in clause (i) and inserting 10 years, (2) by striking was issued in clause (ii) and inserting is issued, (3) by redesignating clauses (i) (as so amended), (ii) (as so amended), and (iii) as subclauses (I), (II), and (III), respectively, and by moving such subclauses 2 ems to the right, (4) by striking Limitations.—Subparagraph (A) shall apply to only one refunding of the original issue and and inserting “ Limitations.— (i) In general Subparagraph (A) shall apply to a bond, and (5) by adding at the end the following new clause: (ii) Source of loan repayment Subparagraph (A) shall not apply to any repayment of a loan which is— (I) made by a repayment of another loan, or (II) financed by an issue treated as a refunding issue under subparagraph (A).. (c) Conforming amendment The heading of paragraph (6) of section 146(i) of the Internal Revenue Code of 1986 is amended by striking residential rental project bonds as refunding bonds irrespective of obligor and inserting bonds as refunding bonds. (d) Effective dates (1) In general The amendments made by subsections (a) and (c) shall apply to bonds issued on or after the date of the enactment of this Act. (2) Removal of one-refunding limit The amendments made by subsection (b) shall apply to repayments of loans received after July 30, 2008.