(1) In general.
An advance refunding issue employs an abusive device and is described in section 149(d)(4) if the issue violates any of the anti-abuse rules under section 1.148-10.
(2) Failure to pay required rebate.
An advance refunding issue is described in section 149(d)(4) if the issue fails to meet the requirements of section 1.148-3. This paragraph (b)(2) applies to any advance refunding issue issued after August 31, 1986.
(3) Mixed escrows invested in tax-exempt bonds.
An advance refunding issue is described in section 149(d)(4) if --
(i) Any of the proceeds of the issue are invested in a refunding escrow in which a portion of the proceeds are invested in tax-exempt bonds and a portion of the proceeds are invested in nonpurpose investments;
(ii) The yield on the tax-exempt bonds in the refunding escrow exceeds the yield on the issue;
(iii) The yield on all the investments (including investment property and tax-exempt bonds) in the refunding escrow exceeds the yield on the issue; and
(iv) The weighted average maturity of the tax-exempt bonds in the refunding escrow is more than 25 percent greater or less than the weighted average maturity of the nonpurpose investments in the refunding escrow, and the weighted average maturity of nonpurpose investments in the refunding escrow is greater than 60 days.
(4) Tax-exempt conduit loans
For purposes of applying section 149(d) to a conduit financing issue that finances any conduit loan that is a tax-exempt bond, the actual issuer of a conduit financing issue and the conduit borrower of that conduit financing issue are treated as related parties. Thus, the issue date of the conduit loan does not occur prior to the date on which the actual issuer of the conduit financing issue sells, exchanges, or otherwise disposes of that conduit loan, and the use of the proceeds of the disposition to pay debt service on the conduit financing issue causes the conduit loan to be a refunding issue. See section 1.148-10(d), Example 4.