(1) General definition of refunding issue.
REFUNDING ISSUE means an issue of obligations the proceeds of which are used to pay principal, interest, or redemption price on another issue (a prior issue, as more particularly defined in paragraph (d)(5) of this section), including the issuance costs, accrued interest, capitalized interest on the refunding issue, a reserve or replacement fund, or similar costs, if any, properly allocable to that refunding issue.
(2) Exceptions and special rules.
For purposes of paragraph (d)(1) of this section, the following exceptions and special rules apply --
(i) Payment of certain interest.
An issue is not a refunding issue if the only principal and interest that is paid with proceeds of the issue (determined without regard to the multipurpose issue rules of section 1.148-9(h)) is interest on another issue that --
(A) Accrues on the other issue during a one-year period including the issue date of the issue that finances the interest;
(B) Is a capital expenditure; or
(C) Is a working capital expenditure to which the de minimis rule of section 1.148-6(d)(3)(ii)(A) applies.
(ii) Certain issues with different obligors --
(A) In general.
An issue is not a refunding issue to the extent that the obligor (as defined in paragraph (d)(2)(ii)(B) of this section) of one issue is neither the obligor of the other issue nor a related party with respect to the obligor of the other issue.
(B) Definition of obligor.
The OBLIGOR of an issue means the actual issuer of the issue, except that the obligor of the portion of an issue properly allocable to an investment in a purpose investment means the conduit borrower under that purpose investment. The obligor of an issue used to finance qualified mortgage loans, qualified student loans, or similar program investments (as defined in section 1.148-1) does not include the ultimate recipient of the loan (e.g., the homeowner, the student).
(iii) Certain special rules for purpose investments.
For purposes of this paragraph (d), the following special rules apply:
(A) Refunding of a conduit financing issue by a conduit loan refunding issue.
Except as provided in paragraph (d)(2)(iii)(B) of this section, the use of the proceeds of an issue that is used to refund an obligation that is a purpose investment (A CONDUIT REFUNDING ISSUE) by the actual issuer of the conduit financing issue determines whether the conduit refunding issue is a refunding of the conduit financing issue (in addition to a refunding of the obligation that is the purpose investment).
(B) Recycling of certain payments under purpose investments.
A conduit refunding issue is not a refunding of a conduit financing issue to the extent that the actual issuer of the conduit financing issue reasonably expects as of the date of receipt of the proceeds of the conduit refunding issue to use those amounts within 6 months (or, if greater, during the applicable temporary period for those amounts under section 148(c) or under applicable prior law) to acquire a new purpose investment. Any new purpose investment is treated as made from the proceeds of the conduit financing issue.
(C) Application to tax-exempt loans.
For purposes of this paragraph (d), obligations that would be purpose investments (absent section 148(b)(3)(A)) are treated as purpose investments.
(iv) Substance of transaction controls.
In the absence of other applicable controlling rules under this paragraph (d), the determination of whether an issue is a refunding issue is based on the substance of the transaction in light of all the facts and circumstances.
(v) Certain integrated transactions in connection with asset acquisition not treated as refunding issues.
If, within six months before or after a person assumes (including taking subject to) obligations of an unrelated party in connection with an asset acquisition (other than a transaction to which section 381(a) applies if the person assuming the obligation is the acquiring corporation within the meaning of section 381(a)), the assumed issue is refinanced, the refinancing issue is not treated as a refunding issue.
(3) Current refunding issue.
Current refunding issue means:
(i) Except as provided in paragraph (d)(3)(ii) of this section, a refunding issue that is issued not more than 90 days before the last expenditure of any proceeds of the refunding issue for the payment of principal or interest on the prior issue; and
(ii) In the case of a refunding issue issued before 1986 --
(A) A refunding issue that is issued not more than 180 days before the last expenditure of any proceeds of the refunding issue for the payment of principal or interest on the prior issue; or
(B) A refunding issue if the prior issue had a term of less than 3 years and was sold in anticipation of permanent financing, but only if the aggregate term of all prior issues sold in anticipation of permanent financing was less than 3 years.
(4) Advance refunding issue.
ADVANCE REFUNDING ISSUE means a refunding issue that is not a current refunding issue.
(5) Prior issue.
PRIOR ISSUE means an issue of obligations all or a portion of the principal, interest, or call premium on which is paid or provided for with proceeds of a refunding issue. A prior issue may be issued before, at the same time as, or after a refunding issue. If the refunded and unrefunded portions of a prior issue are treated as separate issues under section 1.148-9(i), for the purposes for which that section applies, except to the extent that the context clearly requires otherwise, references to a prior issue refer only to the refunded portion of that prior issue.