26 U.S.C. § 103: Interest on State and local bonds

Except as provided in subsection (b), gross income does not include interest on any State or local bond. Any private activity bond which is not a qualified bond (within the meaning of section 141). Any arbitrage bond (within the meaning of section 148). Any bond unless such bond meets the applicable requirements of section 149. The term “State or local bond” means an obligation of a State or political subdivision thereof. The term “State” includes the District of Columbia and any possession of the United States. Except as provided in subparagraph (B), the amendment made by paragraph (1) [amending this section] shall apply to obligations issued after the date of the enactment of this Act [ Oct. 22, 1986 ] in taxable years ending after such date. At the election of the issuer (made at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe), the amendment made by paragraph (1) shall apply to any obligation issued on or before the date of the enactment of this Act.” Except as otherwise provided in this subsection, the amendments made by this section [amending this section and section 103A of this title ] shall apply with respect to bonds issued after December 31, 1984 . The amendments made by this section shall not apply to obligations issued for the Essex County New Jersey Resource Recovery Project authorized by the Port Authority of New York and New Jersey on November 10, 1983 , as part of an agreement approved by Essex County, New Jersey, on July 7, 1981 , and approved by the State of New Jersey on December 31, 1981 . The aggregate face amount of bonds to which this paragraph applies shall not exceed $350,000,000.” Except as otherwise provided in this subsection the amendment made by subsection (a) [amending this section] shall apply to obligations issued after the date of enactment of this Act [ July 18, 1984 ]. The amendments made by this section [amending this section] shall not apply to obligations issued by a program described in the following table to the extent the aggregate face amount of such obligations does not exceed the amount of allowable obligations specified in the following table with respect to such program: Program Amount of Allowable Obligations Colorado Student Obligation Bond Authority $60 million Connecticut Higher Education Supplementary Loan Authority $15.5 million District of Columbia $50 million Illinois Higher Education Authority $70 million State of Iowa $16 million Louisiana Public Facilities Authority $75 million Maine Health and Higher Education Facilities Authority $5 million Maryland Higher Education Supplemental Loan Program $24 million Massachusetts College Student Loan Authority $90 million Minnesota Higher Education Coordinating Board $60 million New Hampshire Higher Education and Health Facilities Authority $39 million New York Dormitory Authority $120 million Pennsylvania Higher Education Assistance Agency $300 million Georgia Private Colleges and University Authority $31 million Wisconsin State Building Commission $60 million South Dakota Health and Educational Facilities Authority $6 million Subparagraph (A) shall apply to obligations issued by the Pennsylvania Higher Education Assistance Agency only if such obligations are issued solely for the purpose of refunding student loan bonds outstanding on March 15, 1984 . For purposes of applying section 103( o ) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], the term ‘consumer loan bond’ shall not include any mortgage subsidy bond (within the meaning of section 103A(b) of such Code) to which the amendments made by section 1102 of the Mortgage Subsidy Bond Tax Act of 1980 [enacting section 103A of this title ] do not apply. the amount of the refunding obligations may not exceed 101 percent of the aggregate face amount of the refunded obligations, and the maturity date of any refunding obligation may not be later than the date which is 17 years after the date on which the refunded obligation was issued (or, in the case of a series of refundings, the date on which the original obligation was issued). in the same manner in which, in the same (or lesser) amount per participant, and for the same purposes for which, The amendments made by this section [amending this section] shall not apply to any obligations described in section 243 of the Crude Oil Windfall Profit Tax Act of 1980 [ Pub. L. 96–223 , set out as a note below]. on August 15, 1985 , a downtown redevelopment authority adopted a resolution to issue obligations for such project, before September 26, 1985 , the city expended, or entered into binding contracts to expend, more than $10,000,000 in connection with such project, and the State supreme court issued a ruling regarding the proposed financing structure for such project on December 11, 1985 . Except as otherwise provided in this subsection, the amendment made by section 621 [amending this section] shall apply to obligations issued after December 31, 1983 . there was an inducement resolution (or other comparable preliminary approval) for the issue before June 19, 1984 , and the issue is issued before January 1, 1985 . there was an inducement resolution (or other comparable preliminary approval) for a project before October 19, 1983 , by any issuing authority, a substantial user of such project notifies the issuing authority within 30 days after the date of the enactment of this Act [ July 18, 1984 ] that it intends to claim its rights under this paragraph, and construction of such project began before October 19, 1983 , or the substantial user was under a binding contract on such date to incur significant expenditures with respect to such project, the city council of such city authorized a feasibility study for a convention center on June 10, 1982 , and on November 4, 1983 , a municipal authority acting for such city accepted a proposal for the construction of a facility that is capable of generating steam and electricity through the combustion of municipal waste, Except as otherwise provided in this section, the amendments made by section 628(b) [amending section 168 of this title ] shall apply to property placed in service after December 31, 1983 , to the extent such property is financed by the proceeds of an obligation (including a refunding obligation) issued after October 18, 1983 . the original use of which commences with the taxpayer and the construction, reconstruction, or rehabilitation of which began before October 19, 1983 , or with respect to which a binding contract to incur significant expenditures was entered into before October 19, 1983 . Except as provided in clause (ii), in the case of property placed in service after December 31, 1983 , which is financed by the proceeds of an obligation which is issued solely to refund another obligation which was issued before October 19, 1983 , the amendments made by section 628(b) shall apply only with respect to an amount equal to the basis in such property which has not been recovered before the date such refunded obligation is issued. In the case of facilities the original use of which commences with the taxpayer and with respect to which significant expenditures are made before January 1, 1984 , the amendments made by section 628(b) shall not apply with respect to such facilities to the extent such facilities are financed by the proceeds of an obligation issued solely to refund another obligation which was issued before October 19, 1983 . In the case of an inducement resolution or other comparable preliminary approval adopted by an issuing authority before October 19, 1983 , for purposes of applying subparagraphs (A)(i) and (B)(ii) with respect to obligations described in such resolution, the term ‘facilities’ means the facilities described in such resolution. Except as otherwise provided in this subtitle, the amendments made by sections 622, 623, 627, and 628(c), (d), and (e) (and the provisions of sections 625(c), 628(f), and 629(b)) [amending this section and enacting provisions set out as notes under this section] shall apply to obligations issued after December 31, 1983 . Notwithstanding any other provision of this section, clause (ii) of section 103(h)(2)(B) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as amended by this subtitle) shall apply to obligations issued after April 14, 1983 ; except that such clause shall not apply to any obligation issued pursuant to a binding contract in effect on March 4, 1983 . the original use of which commences with the taxpayer and the construction, reconstruction, or rehabilitation of which began before October 19, 1983 , and was completed on or after such date, the original use of which commences with the taxpayer and with respect to which a binding contract to incur significant expenditures for construction, reconstruction, or rehabilitation was entered into before October 19, 1983 , and some of such expenditures are incurred on or after such date, or acquired after October 19, 1983 , pursuant to a binding contract entered into on or before such date. Subparagraph (C) of subsection (b)(2) shall apply for purposes of subparagraph (A) of this paragraph. Subparagraph (A) shall not apply with respect to the amendment made by section 628(e) and the provisions of sections 628(f) and 629(b) [amending this section and enacting provisions set out as notes under this section]. The amendment made by section 628(g) [amending this section] shall apply to refunding obligations issued after the date of the enactment of this Act [ July 18, 1984 ]; except that if substantially all the proceeds of the refunded issue were used to provide airports or docks, such amendment shall only apply to refunding obligations issued after December 31, 1984 . In the case of refunding obligations not to exceed $100,000,000 issued after October 21, 1986 , by Dade County, Florida, for the purpose of advance refunding its Aviation Revenue Bonds (Series J), the first sentence of this paragraph shall be applied by substituting ‘the date which is 1 year after the date of the enactment of the Technical and Miscellaneous Revenue Act of 1988 [ Nov. 10, 1988 ]’ for ‘ December 31, 1984 ’ and the amendments made by section 1301 of the Tax Reform Act of 1986 [ section 1301 of Pub. L. 99–514 , enacting sections 141 to 150 and 7703 of this title, amending this section and sections 2, 22, 25, 32, 86, 105, 152, 153, 163, 194, 269A, 414, 879, 1398, 3402, 4701, 4940, 4942, 4988, 6362, 6652, and 7871 of this title, repealing section 103A of this title , enacting provisions set out as notes under sections 141 and 148 of this title, and amending provisions set out as a note under section 103A of this title ] shall not apply. In the case of refunding obligations not exceeding $100,000,000 issued by the Alabama State Docks Department, the first sentence of this paragraph shall be applied by substituting ‘ December 31, 1987 ’ for ‘ December 31, 1984 ’ and the Internal Revenue Code of 1986 shall be applied without regard to [former] section 149(d)(2)..[sic] paragraph (1) shall be applied by substituting ‘ April 12, 1984 ’ for ‘ December 31, 1983 ’, and paragraph (3) shall be applied by substituting ‘ April 13, 1984 ’ for ‘ October 19, 1983 ’ each place it appears. Any property described in paragraph (5), (6), or (7) of section 31(g) of this Act [set out as an Effective Date of 1984 Amendment note under section 168 of this title ]. Any property described in paragraph (4), (8), or (17) of section 31(g) of this Act [set out as an Effective Date of 1984 Amendment note under section 168 of this title ] but only if the obligation is issued before January 1, 1985 , and only if before June 19, 1984 , the issuer had evidenced an intent to issue obligations exempt from taxation under the Internal Revenue Code of 1986 in connection with such property. Any property described in paragraph (3) of section 216(b) of the Tax Equity and Fiscal Responsibility Act of 1982 [set out as an Effective Date of 1982 Amendment note under section 168 of this title ]. a State public authority created pursuant to State legislation which took effect on June 18, 1973 , took formal action before October 19, 1983 , to commit development funds for such facility. such authority issues obligations for any such facility before January 1, 1987 , and expenditures have been made for the development of any such facility before October 19, 1983 . a city government, by resolutions adopted on April 10, 1980 , and December 27, 1982 , took formal action to authorize the submission of a proposal for a feasibility study for such facility and to authorize the presentation to the Department of the Army (U.S. Army Missile Command) of a proposed agreement to jointly pursue construction and operation of such facility, such city government (or a public authority on its behalf) issues obligations for such facility before January 1, 1988 , and expenditures have been made for the development of such facility before October 19, 1983 . Notwithstanding the foregoing provisions of this subsection, the amendments made by section 624 [amending sections 103 and 103A of this title and enacting provisions set out as a note under this section] (relating to arbitrage) shall apply to obligations issued to finance property described in paragraph (5). $15,000,000, or 20 percent of the estimated cost of the facilities. For purposes of paragraph (1), the amount of any UDAG grant preliminarily approved on May 5, 1981 , or April 4, 1983 , shall be treated as an expenditure with respect to the facility for which such grant was so approved. there was an inducement resolution (or other comparable preliminary approval) for an issue before June 19, 1984 , by any issuing authority, and the amendments made by section 623 [amending this section], the amendments made by subsections (a) and (b) of section 627 [amending this section] (except to the extent such amendments relate to farm land), in the case of a race track, the amendment made by section 627(c) [amending this section], and the amendments made by section 628(c) [amending this section].” The amendments made by subsections (a) and (b) [amending this section] shall apply to obligations issued after the date of the enactment of this Act [ Sept. 3, 1982 ]. The amendment made by subsection (c) [amending this section] shall take effect on the date of the enactment of this Act [ Sept. 3, 1982 ]. The amendment made by subsection (d) [amending this section] shall apply with respect to expenditures made after the date of the enactment of this Act [ Sept. 3, 1982 ]. The amendment made by subsection (e) [amending this section] shall apply to obligations issued after December 31, 1982 .” was issued before July 1, 1982 , and has a maturity which does not exceed 3 years. The amendments made by subsection (b) [amending this section] shall apply to obligations issued after December 31, 1982 (including any obligation issued to refund an obligation issued before such date).” Except as provided in paragraph (2), the amendments made by this section [amending this section and section 1104 of Pub. L. 96–499 , formerly set out as a note under section 103A of this title ] shall apply to obligations issued after the date of the enactment of this Act [ Sept. 3, 1982 ]. The amendments made by this section shall not apply with respect to any obligation to which the amendments made by section 1103 of the Mortgage Subsidy Bond Tax Act of 1980 [ section 1103 of Pub. L. 96–499 , amending this section] do not apply by reason of section 1104 of such Act [ section 1104 of Pub. L. 96–499 , formerly set out as a note under section 103A of this title ].” Except as otherwise provided in this subsection, the amendments made by this section [enacting section 4701 of this title and section 757c–5 of former Title 31, Money and Finance, and amending this section and sections 103A, 163, 165, 312, and 1232 of this title] shall apply to obligations issued after December 31, 1982 . The amendments made by subsection (b) [enacting section 4701 of this title and amending this section and sections 163, 165, 312, and 1232 of this title] shall not apply to any obligations issued after December 31, 1982 , on the exercise of a warrant or the conversion of a convertible obligation if such warrant or obligation was offered or sold outside the United States without registration under the Securities Act of 1933 [ 15 U.S.C. 77a et seq.] and was issued before August 10, 1982 . A rule similar to the rule of the preceding sentence shall also apply in the case of any regulations issued under section 163(f)(2)(C) [now 163(f)(2)(B)] of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (as added by this section) except that the date on which such regulations take effect shall be substituted for ‘ August 10, 1982 ’. ” obligations issued after December 31, 1978 , in taxable years ending after such date, and capital expenditures made after December 31, 1978 , with respect to obligations issued before January 1, 1979 . obligations issued after September 30, 1979 , in taxable years ending after such date, and capital expenditures made after September 30, 1979 , with respect to obligations issued after such date.” Treasury Regulation section 1.103–13(g) (1979) is hereby enacted into positive law. Except as provided in clause (ii), subparagraph (A) shall apply to obligations sold after May 2, 1978 , and to which such regulation was provided to apply. Treasury Regulation section 1.103–13(g) (1979) as enacted into positive law by subparagraph (A) shall cease to apply to the extent hereafter modified by the Secretary of the Treasury or his delegate by regulations.” such guarantee is pursuant to a commitment made by the Farmers Home Administration before July 1, 1984 , and such obligation is issued to finance a convention center project in Carbondale, Illinois.” Any obligation which is part of an issue a substantial portion of the proceeds of which is to be used to finance a solid waste disposal facility described in paragraph (2) shall not, for purposes of section 103(h) of the Internal Revenue Code of 1954 [now 1986], be treated as an obligation which is federally guaranteed by reason of the sale of fuel, steam, electricity, or other forms of usable energy to the Federal Government or any agency or instrumentality thereof. a public State authority created pursuant to State legislation which took effect on July 1, 1980 , took formal action before October 19, 1983 , to commit development funds for such facility, such authority issues obligations for such facility before January 1, 1988 , and expenditures have been made for the development of such facility before October 19, 1983 , such facility is operated by the South Eastern Public Service Authority of Virginia, and on December 20, 1984 , the Internal Revenue Service issued a ruling concluding that a portion of the obligations with respect to such facility would not be treated as federally guaranteed under section 103(h) of such Code by reason of the transitional rule contained in section 631(c)(3)(A)(i) of the Tax Reform Act of 1984 [ section 631(c)(3)(A)(i) of Pub. L. 98–369 , set out as a note above], a political subdivision of a State took formal action on April 1, 1980 , to commit development funds for such facility, such facility has a contract to sell steam to a naval base, such political subdivision issues obligations for such facility before January 1, 1988 , and expenditures have been made for the development of such facility before October 19, 1983 , or such facility is a thermal transfer facility, is to be built and operated by the Elk Regional Resource Authority, and is to be on land leased from the United States Air Force at Arnold Engineering Development Center near Tullahoma, Tennessee. In the case of a solid waste disposal facility described in paragraph (2)(A), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $65,000,000. In the case of a solid waste disposal facility described in paragraph (2)(B), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $20,000,000. Such amount shall be in addition to the amount permitted under the Internal Revenue Service ruling referred to in paragraph (2)(B)(ii). In the case of a solid waste disposal facility described in paragraph (2)(C), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $75,000,000. In the case of a solid waste disposal facility described in paragraph (2)(D), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $25,000,000.” the average maturity of the issue of which the refunding obligation is a part does not exceed the average maturity of the obligations to be refunded by such issue, the amount of the refunding obligation does not exceed the amount of the refunded obligation, and the proceeds of the refunding obligation are used to redeem the refunded obligation not later than 90 days after the date of the issuance of the refunding obligation. such obligation is issued before January 1, 1986 , or such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this subsection applies shall not exceed $10,000,000.” such obligations are not industrial development bonds (within the meaning of section 103(b)(2) of the Internal Revenue Code of 1954 [now 1986]), the portion of the proceeds of such obligations so used is attributable to debt approved by voter referendum on or before November 2, 1982 , the loans to such nonexempt persons were approved by the Board of Estimates of the city of Baltimore on or before October 19, 1983 , and the aggregate amount of such temporary advances financed or refinanced by such obligations does not exceed $27,000,000. The amendment made by section 626(a) of the Tax Reform Act of 1984 [ section 626(a) of Pub. L. 98–369 , amending this section] shall not apply to any obligation issued during 1984 to provide financing for the White Pine Power Project in Nevada. sewer, street, lighting, or other governmental improvements to real property, the acquisition of any interest in real property (by a governmental unit having the power to exercise eminent domain), the preparation of such property for new use, or the transfer of such interest to a private developer, or payments of reasonable relocation costs of prior users of such real property, all of the activities described in subparagraph (A) are pursuant to a redevelopment plan adopted by the issuing authority before the issuance of such issue, repayment of such issue is secured exclusively by pledges of that portion of any increase in real property tax revenues (or their equivalent) attributable to the redevelopment resulting from the issue (or similar issues), and none of the property described in subparagraph (A) is subject to a real property or other tax based on a rate or valuation method which differs from the rate and valuation method applicable to any other similar property located within the jurisdiction of the issuing authority. such obligation is issued before January 1, 1986 , such obligation is issued after such date to refund a prior obligation for such project, except that the aggregate amount of obligations to which this subparagraph applies shall not exceed $100,000,000, or such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this subparagraph applies shall not exceed $45,000,000. such obligation is issued before September 27, 1985 , such obligation is issued after such date to refund a prior tax exemption obligation for such project, the amount of such obligation does not exceed the outstanding amount of the refunded obligation, and such prior tax exempt obligation is retired not later than the date 30 days after the issuance of the refunding obligation, or such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this clause applies shall not exceed $150,000,000. The project described in this subparagraph in the St. Johns River Power Park system in Florida which was authorized by legislation enacted by the Florida Legislature in February of 1982.” any obligations issued after the date of enactment of this Act [ July 18, 1984 ], and any obligations issued after December 31, 1969 , which were treated as obligations described in section 103(a) of such Code on the day on which such obligations were issued, substantially all of the proceeds of such obligation are used to acquire railroad track and right-of-way from a railroad involved in a title 11 or similar proceeding (within the meaning of section 368(a)(3)(A) of such Code), and the Federal Railroad Administration provides joint financing for such acquisitions. Any obligation described in subsection (a) shall be treated as a private activity bond for purposes of section 103(n) of the Internal Revenue Code of 1986. The aggregate amount of obligations to which subsection (a)(1) applies shall not exceed $911,000,000. Cable facilities. Small hydroelectric facilities. The acquisition of an interest in an electrical generating facility. Improvements to existing generating facilities. Transmission lines. Electric generating facilities.” the proceeds of any issue are to be used to finance a facility or facilities located on a public airport, and the governmental unit issuing such obligations is the owner or operator of such airport, such obligation is part of an issue, substantially all of the proceeds of such issue are used to provide facilities with respect to which an urban development action grant under section 119 of the Housing and Community Development Act of 1974 [ 42 U.S.C. 5318 ] was preliminarily approved by the Secretary of Housing and Urban Development on January 10, 1980 , and the Secretary of Housing and Urban Development determines, at the time such grant is approved, that the amount of such grant will equal or exceed 5 percent of the total capital expenditures incurred with respect to such facilities.” paragraphs (4) and (5) of section 103(c) of such Code shall not apply, and rules similar to section 103(c)(6) shall apply, The term ‘qualified student loan bond’ has the meaning given to such term by section 103( o )(3) of the Internal Revenue Code of 1986 (as amended by this Act). The term ‘arbitrage bond’ has the meaning given to such term by section 103(c)(2). Except as otherwise provided in this paragraph, any regulations prescribed by the Secretary under paragraph (1) shall apply to obligations issued after the qualified date. the date on which the Higher Education Act of 1965 [ 20 U.S.C. 1001 et seq.] expires, or the date, after the date of enactment of this Act [ July 18, 1984 ], on which the Higher Education Act of 1965 is reauthorized. Notwithstanding clause (i), the qualified date shall not be a date which is prior to the date that is 6 months after the date on which the regulations prescribed under paragraph (1) are published in the Federal Register. Regulations prescribed by the Secretary under paragraph (1) shall not apply to any obligation (or series of refunding obligations) issued exclusively to refund any qualified student loan bond which was issued before the qualified date, except that the requirements of subparagraphs (A) and (B) of section 626(b)(4) of this Act [set out in Effective Date of 1984 Amendment note above] must be met with respect to such refunding. such commitments are binding on the qualified date, and the amount of such commitments is consistent with practices of the issuer which were in effect on March 15, 1984 , with respect to establishing secondary markets for student loans. Under regulations prescribed by the Secretary of the Treasury or his delegate, any student loan bond (other than a qualified student loan bond) issued after December 31, 1985 , shall be treated as an obligation not described in subsection (a)(1) or (2) of section 103 of the Internal Revenue Code of 1986 unless the issue of which such obligation is a part meets requirements similar to those of sections 103(c)(6) and 103A(i) of such Code. the status of any other obligations issued, or to be issued, by such issuer as obligations described in section 103(a) of such Code, or the status of the issuer as an organization exempt from taxation under such Code. For purposes of Federal law, any determination by the executive branch of the Federal Government of whether interest on any obligation is exempt from taxation under the Internal Revenue Code of 1986 shall be exclusively within the jurisdiction of the Department of the Treasury. the appropriate role of tax-exempt bonds which are issued in connection with the guaranteed student loan program and the PLUS program established under the Higher Education Act of 1965 [ 20 U.S.C. 1001 et seq.], and the appropriate arbitrage rules for such bonds. The Comptroller General of the United States and the Director of the Congressional Budget Office, shall submit to the Committee on Finance and the Committee on Labor and Human Resources [now Committee on Health, Education, Labor, and Pensions] of the Senate and the Committee on Ways and Means and the Committee on Education and Labor [now Committee on Education and the Workforce] of the House of Representatives reports on the studies conducted under paragraph (1) by no later than 9 months after the date of enactment of this Act [ July 18, 1984 ].” For purposes of section 103 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], any obligation issued by an authority for 2 or more political subdivisions of a State which is part of an issue substantially all of the proceeds of which are to be used to provide solid waste-energy producing facilities shall be treated as an obligation of a political subdivision of a State which meets the requirements of section 103(b)(4)(E) of such Code (relating to solid waste disposal, etc., facilities). Nothing in the preceding sentence shall be construed to override the limitations of section 103(c) of such Code (relating to arbitrage bonds). substantially all of the fuel for the facility producing steam and electrical energy is derived from solid waste from such solid waste disposal facility, both such solid waste disposal facility and the facility producing steam and electrical energy are owned and operated by the authority referred to in paragraph (1), and all of the electrical energy and steam produced by the facility for producing steam and electricity which is not used by such facility is sold, for purposes other than resale, to an agency or instrumentality of the United States. For purposes of paragraph (2), the term ‘solid waste disposal facility’ means any solid waste disposal facility within the meaning of section 103(b)(4)(E) of the Internal Revenue Code of 1986 (determined without regard to section 103(g) of such Code). This subsection shall not apply to any obligation which is not issued in registered form.” went into full production in 1977, is located within the limits of a city, and is located in the same metropolitan area as the alcohol-producing facility, and before March 1, 1980 , there were negotiations between a governmental body and an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 with respect to the utilization of a special process for the production of alcohol at such alcohol-producing facility. The aggregate amount of obligations which may be issued by reason of paragraph (1) with respect to any project shall not exceed $30,000,000. This subsection shall not apply to obligations issued after December 31, 1985 .” the facility shall be treated as a qualified hydroelectric generating facility (as defined in section 103(b)(8)(A) of such Code) without regard to clause (ii) of section 48( l )(13)(B) of such Code (relating to maximum generating capacity), and the fraction referred to in subparagraph (C) of section 103(b)(8) of such Code shall be deemed to be 1. it would be a qualified hydroelectric generating facility (as defined in section 103(b)(8)(A) of such Code) if clause (ii) of section 48( l )(13)(B) did not apply, it constitutes an expansion of generating capacity at an existing hydroelectric generating facility, the rated capacity of the hydroelectric generating facilities at each such dam on October 18, 1979 , was more than 750 megawatts, the construction of the first such dam began in 1956, power at such first dam was first generated in 1959, and full power production at such first dam began in 1961, and the construction of the second such dam began in 1959, power at such second dam was first generated in 1963, and full power production at such second dam began in 1964, acquisition or construction of the existing facility referred to in subparagraph (B) was financed with the proceeds of an obligation described in section 103(a)(1) of such Code, the existing facility is owned and operated by a State, political subdivision of a State, or agency or instrumentality of any of the foregoing, no more than 60 percent of the electric power and energy produced by such existing facility and of the qualified hydroelectric generating facility is to be sold to anyone other than an exempt person (within the meaning of section 103(b)(3) of such Code), and the agency of the State in which the facility is located which has jurisdiction over water rights had granted, before October 18, 1979 , a water right under which expanded power and energy generating capacity for the facility was contemplated.” the obligations are general obligations of a State, the authority for the issuance of the obligations requires that taxes be levied in sufficient amount to provide for the payment of principal and interest on such obligations, $500,000,000 or one-half of 1 percent of the value of all property in the State, such obligations are issued pursuant to a program to provide financing for small scale energy projects which was established by a State the legislature of which, before October 18, 1979 , approved a constitutional amendment to provide for such a program, and such obligations meet the requirements of paragraph (1) of section 103(h) of the Internal Revenue Code of 1986. For purposes of this subsection, the term ‘renewable energy property’ means property used to produce energy (including heat, electricity, and substitute fuels) from renewable energy sources (including wind, solar, and geothermal energy, waste heat, biomass, and water). Subsection (a) shall apply with respect to obligations issued after the date of enactment of this Act [ Apr. 2, 1980 ].” shall not cause the refunding obligations out of which the refund profit arose to be treated as arbitrage bonds (within the meaning of section 103(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) and may be paid without penalty imposed on the issuer of such obligations. requested in writing a rule by the Internal Revenue Service with respect to the tax consequences of paying refund profit to charitable organizations, failed to receive a favorable ruling and did not pay the refund profit to a charitable organization, and The term ‘Refund profit’ means interest, profit, or other amounts generated by, or arising out of, the advance refunding, before September 24, 1976 , of an obligation of a State or local government described in section 103 of such Code. The term ‘charitable organization’ means an organization described in section 501(c)(3) of such Code and exempt from taxation under section 501(a) of such Code other than an organization described in section 509(a) of such Code. The term ‘qualified agreement’ means an agreement (whether or not enforceable) which provides for, or contemplates, the payment of refund profit to one or more charitable organizations. The term ‘low-interest United States obligations’ means United States obligations which bear an interest rate lower than the highest rate of interest borne by public debt securities generally available for purchase at the time such obligations were purchased.” the issuance of the obligation (or the project in connection with which the proceeds of the obligations are to be used) was authorized or approved by the governing body of the governmental unit issuing the obligation or by the voters of such governmental unit; in connection with the issuance of such obligation or with the use of the proceeds to be derived from the sale of such obligation or the property to be acquired or improved with such proceeds, a governmental unit has made a significant financial commitment; any person (other than a governmental unit) who will use the proceeds to be derived from the sale of such obligation or the property to be acquired or improved with such proceeds has expended (or has entered into a binding contract to expend) for purposes which are related to the use of such proceeds or property, an amount equal to or in excess of 20 percent of such proceeds; or in the case of an obligation issued in conjunction with a project where financial assistance will be provided by a governmental agency concerned with economic development, such agency has approved the project or an application for financial assistance is pending.”