These synopses are intended only as aids to the reader in

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

REG-117298-21, page 784.

The proposed regulations would update certain arbitrage

rules and definitions applicable to tax-exempt and other

tax-advantaged bonds by clarifying the time and manner

for requesting refunds of overpayment of rebate, the special transition rule for transferred proceeds, the limitation on

allocations to expenditures, and the address for filing defeasance notices.

Finding Lists begin on page ii.





Bulletin No. 2026–14

March 30, 2026

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and

enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

March 30, 2026 

Bulletin No. 2026–14

Part IV

Notice of Proposed

Rulemaking

Guidance on Tax-Exempt

Refunding Bonds

REG-117298-21

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking.

SUMMARY: This document contains

proposed regulations that would update

certain arbitrage rules and definitions

applicable to tax-exempt and other tax-advantaged bonds by clarifying the time and

manner for requesting refunds of overpayment of rebate to the United States,

the special transition rule for transferred

proceeds, the limitation on allocations to

expenditures, and the IRS address for filing defeasance notices. These proposed

regulations would also revise the provision addressing certain perpetual State

guarantee funds, the definition of tax-exempt bond, and the definition of refunding issue. The proposed regulations would

affect issuers of tax-advantaged bonds.

DATES: Electronic or written comments

and requests for a public hearing must be

received by May 11, 2026.

ADDRESSES: Commenters are strongly

encouraged to submit public comments

electronically via the Federal eRulemaking Portal at https://www.regulations.gov

(indicate IRS and REG-117298-21) by

following the online instructions for submitting comments. Requests for a public

hearing must be submitted as prescribed

in the “Comments and Requests for a

Public Hearing” section. Once submitted

to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The

Department of the Treasury (Treasury

Department) and the IRS will publish for

public availability any comment submitted to the IRS’s public docket. Send paper

March 30, 2026

submissions to: CC:PA:01:PR (REG117298-21), Room 5503, Internal Revenue Service, P.O. Box 7604, Ben Franklin

Station, Washington, DC 20044.

FOR FURTHER INFORMATION

CONTACT: Concerning the proposed

regulations, Brian Choi of the Office of

Associate Chief Counsel (Financial Institutions and Products), (202) 317-3154

(not a toll-free number); concerning submission of comments or request for a public hearing, Publications and Regulations

Section at (202) 317-6901 (not a toll-free

number) or by email at publichearings@

irs.gov (preferred).

SUPPLEMENTARY INFORMATION:

Authority

This document contains proposed regulations under sections 148 and 150 of

the Internal Revenue Code (Code) that

would amend the Income Tax Regulations

(26 CFR part 1). Section 148(i) provides

an express delegation of authority for

the Secretary of the Treasury or the Secretary’s delegate (Secretary) to prescribe

such regulations as may be necessary or

appropriate to carry out the purposes of

section 148. The proposed regulations are

also issued under the express delegation

of authority under section 7805(a) of the

Code, which authorizes the Secretary to

“prescribe all needful rules and regulations for the enforcement of [the Code],

including all rules and regulations as may

be necessary by reason of any alteration of

law in relation to internal revenue.”

Background

On June 18, 1993, the Treasury Department and the IRS published comprehensive final regulations (TD 8476) in the

Federal Register (58 FR 33510) on the

arbitrage investment restrictions and

related provisions for bonds the interest

on which is exempt from Federal income

tax under section 103 of the Code (tax-exempt bonds). The 1993 final regulations

have been amended in certain limited

respects and, as amended, are referred to

784

as the “existing regulations” in this preamble.

The exclusion from gross income

under section 103 of the interest on a

State or local bond does not extend to an

arbitrage bond. Section 148 defines an

“arbitrage bond” and generally prohibits

the investment of tax-exempt bond proceeds in investments producing a yield

that is materially higher than the yield

on the bond issue. See section 148(a)

through (e) and (g). The rules related to

this prohibition commonly are referred

to as the “yield restriction rules.” In situations in which higher yielding investments of bond proceeds are permitted,

section 148(f) provides, with certain

exceptions, that bonds of an issue will be

treated as arbitrage bonds and therefore

not tax-exempt, unless the issuer rebates

to the United States at specific intervals

the yield on investments that is in excess

of the yield on the issue. The rules related

to this provision are commonly referred

to as the “rebate rules.” Failure to meet

the requirements of either of these sets

of rules results in the bonds of an issue

being arbitrage bonds under section 148.

Explanation of Provisions

These proposed regulations would

update the existing regulations to reflect

a statutory change, clarify aspects of the

existing regulations, and provide rules for

situations not addressed in the existing

regulations.

1. Section 1.148-2 Removal of Provision

Regarding 150 Percent Debt Service

Limitation

The Tax Reduction Act of 1997, Public Law 105-34, section 1443, 111 Stat.

787, 1054 (1997), amended section

148(d), which provides special arbitrage

rules for reasonably required reserve or

replacement funds applicable to tax-exempt bonds, by striking section 148(d)

(3) (former section 148(d)(3)), which had

imposed a limitation on investment in

“nonpurpose investments” applicable to

bonds issued on or before August 5, 1997.

These proposed regulations would remove

Bulletin No. 2026–14

existing §1.148-2(f)(2)(iv), which relates

to former section 148(d)(3).

2. Section 1.148-3 Amendment to Rules

for Recovery of Overpayments of Rebate

Section 1.148-3(i)(1) of the existing

regulations provides that, in general, an

issuer may recover an overpayment for an

issue of tax-exempt bonds by establishing

to the satisfaction of the Commissioner

of Internal Revenue that the overpayment

occurred. An overpayment is the excess

of the amount paid to the United States

for an issue under section 148 over the

sum of the “rebate amount” for the issue

(as defined in existing §§1.148-1(b) and

1.148-3(b)) as of the most recent “computation date” (as defined in existing §1.1483(e)) and all amounts that are otherwise

required to be paid under section 148 as

of the date the recovery is requested by

the issuer. These amounts include overpayments of arbitrage rebates, penalties

in lieu of arbitrage rebates, and yield

reduction payments.

Existing §1.148-3(i)(3)(i) provides

that an issuer must request a refund of an

overpayment (claim) no later than the date

that is two years after the final computation date for the issue to which the overpayment relates (filing deadline). Existing

§1.148-3(e)(2) provides that the final computation date generally is the date that an

issue is discharged (for example, retired

at maturity or redeemed earlier). Existing

§1.148-3(g) provides that each rebate payment must be paid no later than 60 days

after the computation date to which the

payment relates.

In certain circumstances involving

payments to the United States made under

section 148 after the final computation

date, the filing deadline in the existing

regulations may not provide an adequate

opportunity for issuers of tax-advantaged

bonds to recover such overpayments. Rev.

Proc. 2024-37, 2024-41 I.R.B. 755 (October 7, 2024), extended the time for filing

claims to ensure that issuers have a reasonable opportunity to recover overpayments

made both before and after the final computation date. Section 4.02 of Rev. Proc.

2024-37 provides that an issuer must file

a claim with respect to an issue of bonds

no later than two years after (1) the date

that is 60 days after the final computation

Bulletin No. 2026–14

date of the issue to which the payment

relates; or (2) with respect to the portion

of the overpayment paid more than 60

days after the final computation date, the

date that the payment was made to the

United States. These proposed regulations

would amend existing §1.148-3(i)(3)(i) to

reflect the revised filing deadline provided

in Rev. Proc. 2024-37.

3. Section 1.148-5 Amendment to the

Special Transition Rule for Transferred

Proceeds

Existing §1.148-5 provides rules for

computing the yield and value of investments allocated to an issue for various

purposes under section 148. See existing

§1.148-5(a). In general, under existing

§1.148-5(d)(1), the value of an investment

on a date must be determined consistently

for all purposes of section 148 on that date

using one of three valuation methods: (1)

outstanding principal amount plus accrued

unpaid interest for a plain par investment;

(2) present value for a fixed rate investment; or (3) fair market value for any

investment. In certain instances, existing

§1.148-5(d)(2) and (3) require investments to be valued at present value or fair

market value.

Existing §1.150-1(d) defines a “refunding issue” generally to mean an issue of

obligations the proceeds of which are used

to pay principal, interest, or redemption

price on another issue, provided the obligor of one issue is also the obligor of the

other issue or a related party (as defined

in existing §1.150-1(b)) with respect to

the obligor of the other issue. Pursuant to

existing §1.148-9(b)(1), when proceeds

of a refunding issue discharge any of the

outstanding principal of a prior issue, proceeds of the prior issue become transferred

proceeds of the refunding issue and cease

to be proceeds of the prior issue. Under

existing §1.148-9(c)(1)(ii), when proceeds of a prior issue become transferred

proceeds of a refunding issue, investments

(and the related payments and receipts) of

proceeds of the prior issue are allocated to

the transferred proceeds. Existing §1.1485(d)(4) provides that the value of a “nonpurpose investment” (defined in existing

§1.148-1(b)) that is allocated to transferred proceeds of a refunding issue on a

transfer date may not exceed the value of

785

that investment on the transfer date used

for purposes of applying the arbitrage

restrictions to the refunded issue.

Questions have been raised about the

meaning of the phrase “arbitrage restrictions” in existing §1.148-5(d)(4), which

the existing regulations do not define.

Some issuers have interpreted that phrase

to refer only to the yield restriction rules

and not to the rebate rules. The Treasury

Department and the IRS disagree with

such an interpretation. If this special rule

for transferred proceeds is not applied

for all purposes of section 148, an issuer

could, for example, avoid rebating excess

investment yield by refunding the bonds

and using a different valuation method for

investments than was used in determining rebate for the prior issue. Proposed

§1.148-5(d)(4) would clarify that the

limit under this special transition rule for

transferred proceeds is the value of that

investment on the transfer date used for

all purposes of applying section 148 to the

refunded issue.

4. Section 1.148-6 Amendment to

Allocation to Expenditures

Existing §1.148-6(d)(1)(i) provides

reasonable accounting methods for allocating funds from different sources to

expenditures for the same governmental

purpose. Existing §1.148-6(d)(1)(ii) provides that an allocation of gross proceeds

of an issue to an expenditure must involve

a current outlay of cash for a governmental purpose of the issue. A “current outlay of cash” means an outlay reasonably

expected to occur not later than five banking days after the date as of which the allocation of gross proceeds to the expenditure is made. Existing §1.148-6(d)(1)(iii)

generally requires the issuer to account for

the allocation of proceeds to expenditures

not later than 18 months after the later of

the date the expenditure is paid or the date

the project, if any, that is financed by the

issue is placed in service. This allocation

must be made in any event by the date 60

days after the fifth anniversary of the issue

date or the date 60 days after the retirement of the issue, if earlier.

There have been questions about

whether an issuer can allocate from a

source of funds that the issuer receives

after the cash outlay but before the dead-

March 30, 2026

line to account for its allocations. These

questions evidence a confusion between

the period allowed for making allocations (the timing rule in existing §1.1486(d)(1)(iii)) and the date as of which the

allocation to the expenditure is made

under the current outlay of cash requirement in existing §1.148-6(d)(1)(ii). The

timing rule allows an issuer an extended

period in which to do its accounting for

expenditures of gross proceeds; this rule

does not change the sources of funds that

an issuer had available on the reasonably

expected date of the cash outlay. Proposed §1.148-6(d)(1)(ii) would eliminate

this confusion by clarifying that to allocate funds from a specific source to an

expenditure, those funds must be held by

or on behalf of the issuer on the date of

the cash outlay.

5. Section 1.148-11 Amendment to

Transition Rule for Certain State

Guarantee Funds

Existing §1.148–11(d)(1) provides a

rule that allows certain State perpetual

trust funds (for example, certain State

permanent school funds) to pledge funds

to guarantee tax-exempt bonds without

resulting in arbitrage-restricted replacement proceeds. The demand for public

school bond guarantees continues to

grow as student populations expand and

existing school buildings age. As a result,

certain State perpetual trust funds were

approaching the limited capacity under

existing §1.148–11(d)(1) to provide such

guarantees without resulting in arbitrage-restricted replacement proceeds.

In Notice 2023-39, 2023-22 I.R.B. 877

(May 30, 2023), the Treasury Department

and the IRS stated their intent to propose

regulations to revise the determination

of the amount of tax-exempt bonds that

such funds could guarantee under this

special rule and requested comments

on the interim guidance set forth in the

Notice. The comments received supported the revision to the regulations.

Accordingly, proposed §1.148-11(d)(1)

(i) would include this proposed change

and would revise the cross-reference in

§1.148-11(d)(1)(i)(E) by substituting

paragraphs (d)(1)(i)(A) through (d)(1)(i)

(C) for paragraphs (d)(1)(i) through (d)

(1)(iii).

March 30, 2026

6. Section 1.150-1 Amendments to

Definitions

b. Amendment to the definition of

refunding issue

a. Amendment to the definition of taxexempt bond

Existing §1.150-1(d) defines a “refunding issue” generally to mean an issue of

obligations the proceeds of which are used

to pay principal, interest, or redemption

price on another issue, provided the obligor of one issue is also the obligor of the

other issue or a related party with respect

to the obligor of the other issue.

For this purpose, if proceeds are

used to finance a purpose investment (as

defined in existing §1.148-1(b)), the obligor means the conduit borrower of the

purpose investment rather than the actual

issuer of the bonds, except that, for qualified mortgage loans, qualified student

loans, and similar program investments (as

defined in existing §1.148-1), the obligor

does not include the ultimate recipients of

the loans (for example, the homeowner or

the student). Existing §1.150-1(d)(2)(iii)

provides, with one exception, that the use

of the proceeds of an issue that refunds a

purpose investment by the actual issuer

of the conduit financing issue determines

whether that issue is also a refunding of

the issue that originally financed the purpose investment. Existing §1.150-1 does

not provide a definition of “proceeds” for

this purpose.

Questions have arisen regarding the

determination of whether an issue that is

used to refinance qualified student loans is

a refunding issue. Issuers have expressed

concern that if the borrowers of the refinancing loans repay their original loans

and the issuer then uses the funds to

redeem the bonds that financed the original loans, the bonds might be treated as

refunding bonds and, because this redemption would often occur more than 90 days

after the issuance of the bonds used for

refinancing the qualified student loans,

potentially treated as advance refunding

bonds the interest on which would not

be exempt from Federal income tax. This

would prevent issuers from issuing tax-exempt bonds to refinance the qualified student loans of their existing borrowers.

In Notice 2024-32, 2024-16 I.R.B. 897

(April 15, 2024), the Treasury Department

and the IRS provided that an issue is not a

refunding issue to the extent that the actual

issuer reasonably expects as of the issue

date of the issue to use net proceeds of the

Existing §1.150-1(b) defines “tax-exempt bond” to mean any bond the interest

on which is excludable from gross income

under section 103(a). For purposes of

section 148, the definition also includes

a certificate of indebtedness issued by the

United States Treasury pursuant to the

Demand Deposit State and Local Government Series program described in 31

CFR part 344 (the SLGS regulations).

Existing §1.148-1(c)(4)(ii)(E) defines

“eligible tax-exempt bonds” for purposes

of the safe harbor for longer-term working

capital financings in existing §1.148-1(c)

(4)(ii). This definition similarly includes a

certificate of indebtedness issued pursuant

to the Demand Deposit State and Local

Government Series program described in

the SLGS regulations.

Section 344.7(b) of the SLGS regulations provides that at any time the Secretary determines that issuance of obligations sufficient to conduct the orderly

financing operations of the United States

cannot be made without exceeding the

statutory debt limit, the Bureau of the Fiscal Service may invest any unredeemed

Demand Deposit securities in special

90-day certificates of indebtedness. When

regular Treasury borrowing operations

resume, the special 90-day certificates of

indebtedness, along with accrued interest,

are reinvested in Demand Deposit securities. The Treasury Department and the

IRS have determined that the involuntary

conversion of a Demand Deposit security

into special 90-day certificates of indebtedness during a debt limit contingency

may lead to a failure to comply with the

rules under section 148, such as the yield

restriction rules, which would result in an

arbitrage bond. To address this situation,

proposed §1.150-1(b)(2) would add the

special 90-day certificate of indebtedness

to the definition of tax-exempt bond for

purposes of section 148. Proposed §1.1481(c)(4)(ii)(E)(3) similarly would amend

the safe harbor for longer-term working capital financings to add the special

90-day certificate of indebtedness to the

definition of eligible tax-exempt bonds.

786

Bulletin No. 2026–14

issue within two years of the issue date to

refinance one or more obligations that are

qualified student loans. Proposed §1.1501(d)(2)(iii)(C) would add this provision to

the special rules for purpose investments.

This special rule would apply even if the

actual issuer’s ultimate use of the proceeds lent to the borrowers is the payment

of principal, interest, or redemption price

on another issue.

Another question that has arisen concerns whether the use of investment proceeds from the repayments of qualified

student loans or qualified mortgage loans

allocated to one issue to redeem bonds

of another issue, a practice sometimes

referred to as “cross-calling,” results in

bonds of the former issue being treated

as taxable advance refunding bonds.

An issuer engaged in cross-calling first

uses proceeds of the issue to make qualified student loans or qualified mortgage

loans and then uses the repayments of the

loans to redeem bonds, generally selecting bonds with the highest interest rates.

In Notice 2024-32, the Treasury Department and the IRS defined “proceeds” for

purposes of determining whether an issue

is a refunding issue to include any sales

proceeds, investment proceeds, or transferred proceeds (all as defined in existing

§1.148-1(b)), but the definition expressly

excludes investment proceeds (or transferred proceeds allocable to investment

proceeds) received from investing in a

qualified student loan or qualified mortgage loan. Proposed §1.150-1(d)(6) would

add this definition.

7. Section 1.150-5 Amending the Address

for Filing Notices and Elections

Existing §1.150-5(a) provides that certain notices and elections must be filed

with the Internal Revenue Service, 1111

Constitution Avenue, NW, Attention:

T:GE:TEB:O, Washington, DC 20024 or

such other place designated by publication

of a notice in the Internal Revenue Bulletin. The address specified in the existing

regulations is outdated, and the use of this

outdated address is inefficient because it

delays appropriate routing of the notices

and elections. Proposed §1.150-5(a)

would delete the specified address and

expand the options for publication of the

address to include any publication in the

Bulletin No. 2026–14

Internal Revenue Bulletin or on the IRS

website, such as at https://www.irs.gov/

bondsmailing or a successor IRS webpage. These revisions will increase efficiency by facilitating the timely receipt of

the filings by the IRS and permit the IRS

to more efficiently publish any address

changes for the filings of the specified

notices and elections.

Proposed Applicability Dates

In general, the proposed regulations

are proposed to apply to bonds sold on

or after the date 90 days after the date

of publication of final regulations in the

Federal Register. However, the removal

of existing §1.148-2(f)(2)(iv) is proposed

to apply as of the date of publication of

final regulations in the Federal Register. Proposed §1.148-3(i)(3)(i) is proposed to apply to claims arising from an

issue of bonds to which §1.148-3(i) will

apply and that are filed with the IRS on

or after the date of publication of final

regulations in the Federal Register. Proposed §1.150-5(a) is proposed to apply to

notices and elections filed after the date

30 days after the date of publication of

final regulations in the Federal Register. Issuers of tax advantaged bonds may

rely on proposed §1.150-1(b)(2), which

would add the special 90-day certificate of indebtedness to the definition of

tax-exempt bond for purposes of section

148, and proposed §1.148-1(c)(4)(ii)(E)

(3), which would amend the safe harbor

for longer-term working capital financings to add the special 90-day certificate

of indebtedness to the definition of eligible tax-exempt bonds, prior to the applicability date of the final regulations.

Special Analyses

I. Regulatory Planning and Review

These proposed regulations are not

subject to review under section 6(b) of

Executive Order 12866 pursuant to the

Memorandum of Agreement (July 4,

2025) between the Treasury Department

and the Office of Management and Budget

regarding review of tax regulations.

The Executive Order 14192 designation for this proposed rule, if finalized, is

expected to be deregulatory.

787

II. Regulatory Flexibility Act

Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it is hereby

certified that these proposed regulations

would not have a significant economic

impact on a substantial number of small

entities. The proposed regulations would

affect State and local governments that

issue tax-exempt bonds. States are not

considered small entities for purposes of

the Regulatory Flexibility Act, but small

governmental jurisdictions (jurisdictions

with populations less than 50,000) are

considered small entities. The Treasury

Department and the IRS do not have

data on how many small governmental

jurisdictions may be affected by these

proposed regulations, but it may be a

substantial number. Even if a substantial

number of small entities were affected,

the economic impact of these regulations

would not be significant. These proposed regulations would clarify existing

final regulations, incorporate a statutory

change and integrate guidance published

in Rev. Proc. 2024-37, Notice 2023-39,

and Notice 2024-32. Therefore, these

proposed regulations would not create

significant additional obligations for, or

impose any meaningful economic impact

on, a substantial number of small entities. Accordingly, the Secretary certifies

that the proposed regulations would not

have a significant economic impact on a

substantial number of small entities and

a regulatory flexibility analysis under

the Regulatory Flexibility Act is not

required.

III. Unfunded Mandates Reform Act

Section 202 of the Unfunded Mandates

Reform Act of 1995 (UMRA) requires that

agencies assess anticipated costs and benefits and take certain other actions before

issuing a final rule that includes any Federal mandate that may result in expenditures in any one year by a State, local, or

Tribal government, in the aggregate, or by

the private sector, of $100 million in 1995

dollars, updated annually for inflation.

These proposed rules do not include any

Federal mandate that may result in expenditures by State, local, or Tribal governments, or by the private sector in excess of

that threshold.

March 30, 2026

IV. Submission to the Small Business

Administration

Pursuant to section 7805(f) of the

Code, these proposed regulations have

been submitted to the Chief Counsel for

Advocacy of the Small Business Administration for comment on their impact on

small business.

V. Executive Order 13132: Federalism

Executive Order 13132 (entitled

“Federalism”) prohibits an agency from

publishing any rule that has federalism

implications if the rule either imposes

substantial, direct compliance costs on

State and local governments, and is not

required by statute, or preempts State law,

unless the agency meets the consultation

and funding requirements of section 6 of

the Executive order. These proposed regulations do not have federalism implications and do not impose substantial direct

compliance costs on State and local governments or preempt State law within the

meaning of the Executive order.

Comments and Requests for Public

Hearing

Before these proposed regulations are

adopted as final regulations, consideration

will be given to any comments that are

submitted timely to the IRS as prescribed

in this preamble under the ADDRESSES

heading. The Treasury Department and

the IRS request comments on all aspects

of the proposed regulations. Any comments submitted will be made available

at https://www.regulations.gov or upon

request. A public hearing will be scheduled if requested in writing by any person

who timely submits electronic or written

comments. Requests for a public hearing

are encouraged to be made electronically.

If a public hearing is scheduled, notice of

the date, time, and place for the hearing

will be published in the Federal Register.

Availability of IRS Documents

The IRS Revenue Procedure and

Notices cited in this preamble are published in the Internal Revenue Bulletin

and available from the Superintendent of

Documents, U.S. Government Publishing

March 30, 2026

Office, Washington, DC 20402, or by visiting the IRS website at https://www.irs.

gov.

Drafting Information

The principal authors of these regulations are Brian Choi and Zoran Stojanovic

of the Office of Associate Chief Counsel (Financial Institutions and Products).

However, other personnel from the Treasury Department and the IRS participated

in their development.

List of Subjects in 26 CFR Part 1

Income taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the

Regulations

Accordingly, the Treasury Department

and the IRS propose to amend 26 CFR

part 1 as follows:

PART 1--INCOME TAXES

Paragraph 1. The authority citation

for part 1 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

*****

Section 1.148-0 through 1.148-11 also

issued under 26 U.S.C. 148(i).

*****

Par. 2. Section 1.148-0 is amended, in

paragraph (c), in the table of contents for

§1.148-11, by revising the section heading for §1.148-11 and adding entries for

§1.148-11(o) and (p) to read as follows:

§1.148-0 Scope and table of contents.

*****

(c) * * *

§1.148-11 Applicability dates.

*****

(o) Certain clarifying amendments.

(p) Removal of §1.148-2(f)(2)(iv).

Par. 3. Section 1.148-1 is amended by

revising paragraph (c)(4)(ii)(E)(3) to read

as follows:

§1.148-1 Definitions and elections.

*****

788

(c) * * *

(4) * * *

(ii) * * *

(E) * * *

(3) A certificate of indebtedness,

including a special 90-day certificate of

indebtedness, issued by the United States

Treasury pursuant to the Demand Deposit

State and Local Government Series program described in 31 CFR part 344.

*****

§1.148-2 [Amended]

Par. 4. Section 1.148-2 is amended by

removing paragraph (f)(2)(iv).

Par. 5. Section 1.148-3 is amended by

revising paragraph (i)(3)(i) to read as follows:

§1.148-3 General arbitrage rebate

rules.

*****

(i) * * *

(3) * * *

(i) An issuer must request a refund of

an overpayment (claim) using the form

provided by the Commissioner for this

purpose. The claim must be made with

respect to an issue of bonds no later than

the date (filing deadline) that is two years

after-(A) The date that is 60 days after the

final computation date of the issue to

which the payment relates; or

(B) With respect to the portion of the

overpayment paid more than 60 days

after the final computation date, the date

that the payment was made to the United

States.

*****

Par. 6. Section 1.148-5 is amended by

revising paragraph (d)(4) to read as follows:

§1.148-5 Yield and valuation of

investments.

*****

(d) * * *

(4) Special transition rule for transferred proceeds. The value of a nonpurpose investment that is allocated to transferred proceeds of a refunding issue on a

transfer date may not exceed the value of

that investment on the transfer date used

Bulletin No. 2026–14

for purposes of applying section 148 to the

refunded issue.

*****

Par. 7. Section 1.148-6 is amended by

adding a sentence to the end of paragraph

(d)(1)(ii) to read as follows:

§1.148-6 General allocation and

accounting rules.

*****

(d) * * *

(1) * * *

(ii) * * * To allocate funds from a specific source to an expenditure, those funds

must be held by or on behalf of the issuer

on the date of the cash outlay.

*****

Par. 8. Section 1.148-11 is amended

by:

1. Revising the section heading.

2. Revising paragraphs (d)(1)(i)(E) and

(F), and (k)(3)(i).

3. Adding paragraphs (o) and (p).

The revisions and additions read as follows:

§1.148-11 Applicability dates.

*****

(d) * * *

(1) * * *

(i) * * *

(E) The fund satisfied each of the

requirements of paragraphs (d)(1)(i)(A)

through (C) of this section on August 16,

1986; and

(F) As of the sale date of the bonds to

be guaranteed, the amount of the bonds

to be guaranteed by the fund plus the

then-outstanding amount of bonds previously guaranteed by the fund does not

exceed a total amount equal to 500 percent

of the total costs of the assets held by the

fund.

*****

(k) * * *

(3) * * *

(i) Section 1.148-3(i)(3)(i) applies to

claims arising from an issue of bonds to

which §1.148-3(i) applies and that are

filed with the Internal Revenue Service

on or after [the date of publication of final

regulations in the Federal Register].

*****

(o) Certain clarifying amendments.

Sections 1.148-1(c)(4)(ii)(E)(3), 1.148-

Bulletin No. 2026–14

5(d)(4), 1.148-6(d)(1)(ii), and paragraphs (d)(1)(i)(E) and (F) of this section apply to bonds sold on or after [the

date 90 days after the date of publication

of final regulations in the Federal Register].

(p) Removal of §1.148-2(f)(2)(iv). The

removal of §1.148-2(f)(2)(iv) applies as

of [the date of publication of final regulations in the Federal Register].

Par. 9. Section 1.150-1 is amended by:

1. Adding paragraph (a)(5).

2. In paragraph (b), revising the definition of Tax-exempt bond.

3. Revising paragraphs (d)(1) and (d)

(2)(iii)(A).

4. Redesignating paragraph (d)(2)(iii)

(C) as paragraph (d)(2)(iii)(D).

5. Adding new paragraph (d)(2)(iii)(C)

and paragraph (d)(6).

The additions and revisions read as follows:

§1.150-1 Definitions.

(a) * * *

(5) Applicability date for special rules

for purpose investments and definition of

proceeds. The definition of tax-exempt

bond in paragraph (b) of this section and

paragraphs (d)(1), (d)(2)(iii)(A) and (C),

and (d)(6) of this section apply to bonds

sold on or after [the date 90 days after the

date of publication of final regulations in

the Federal Register].

(b) * * *

Tax-exempt bond means any bond

the interest on which is excludable from

gross income under section 103(a). For

purposes of section 148, tax-exempt

bond includes:

(1) An interest in a regulated investment company to the extent that at least 95

percent of the income to the holder of the

interest is interest that is excludable from

gross income under section 103; and

(2) A certificate of indebtedness,

including a special 90-day certificate of

indebtedness, issued by the United States

Treasury pursuant to the Demand Deposit

State and Local Government Series program described in 31 CFR part 344.

*****

(d) * * *

(1) General definition of refunding

issue. Refunding issue means an issue

of obligations the proceeds (as defined

789

in paragraph (d)(6) of this section) 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) * * *

(iii) * * *

(A) Refunding of a conduit financing

issue by a conduit loan refunding issue.

Except as provided in paragraphs (d)(2)

(iii)(B) and (C) 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).

*****

(C) Issue used to refinance qualified

student loans. An issue is not a refunding

issue to the extent that the actual issuer

reasonably expects as of the issue date of

the issue to use net proceeds of the issue

within two years of the issue date to refinance one or more obligations that are

qualified student loans (as defined in paragraph (b) of this section).

*****

(6) Definition of proceeds. For purposes

of this paragraph (d), proceeds means

any sale proceeds, investment proceeds,

or transferred proceeds (all as defined in

§1.148-1(b)), except that proceeds does

not include investment proceeds (or transferred proceeds allocable to investment

proceeds) received from investing in a

qualified mortgage loan or a qualified student loan.

*****

Par. 10. Section 1.150-5 is revised to

read as follows:

§1.150-5 Filing notices and elections.

(a) In general. Notices and elections

under the following sections must be filed

with the Internal Revenue Service at such

place designated by guidance published

in the Internal Revenue Bulletin (see

March 30, 2026

§601.601(d) of this chapter) or on the IRS

website (https://www.irs.gov)-(1) Section 1.141-12(d)(4);

(2) Section 1.142(f)(4)-1; and

(3) Section 1.142-2(c)(2).

March 30, 2026

(b) Applicability date. This section

applies to notices and elections filed on

or after [the date 30 days after the date of

publication of final regulations in the Federal Register].

790

Frank J. Bisignano,

Chief Executive Officer.

(Filed by the Office of the Federal Register March

11, 2025, 8:45 a.m., and published in the issue of the

Federal Register for March 12, 2026, 91 FR 12118)

Bulletin No. 2026–14

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

­effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds that

the same principle also applies to B, the

earlier ruling is amplified. (Compare with

modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

has caused, or may cause, some confusion. It is not used where a position in a

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously published ruling and points out an essential

difference between them.

Modified is used where the substance

of a previously published position is being

changed. Thus, if a prior ruling held that a

principle applied to A but not to B, and the

new ruling holds that it applies to both A

and B, the prior ruling is modified because

it corrects a published position. (Compare

with amplified and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions.

This term is most commonly used in a ruling

that lists previously published rulings that

are obsoleted because of changes in laws or

regulations. A ruling may also be obsoleted

because the substance has been included in

regulations subsequently adopted.

Revoked describes situations where the

position in the previously published ruling

is not correct and the correct position is

being stated in a new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a

period of time in separate rulings. If the

new ruling does more than restate the substance of a prior ruling, a combination of

terms is used. For example, modified and

superseded describes a situation where the

substance of a previously published ruling

is being changed in part and is continued

without change in part and it is desired to

restate the valid portion of the previously

published ruling in a new ruling that is

self contained. In this case, the previously

published ruling is first modified and then,

as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and that

list is expanded by adding further names

in subsequent rulings. After the original

ruling has been supplemented several

times, a new ruling may be published that

includes the list in the original ruling and

the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations

to show that the previous published rulings will not be applied pending some

future action such as the issuance of new

or amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

The following abbreviations in current

use and formerly used will appear in

material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

E.O.—Executive Order.

ER—Employer.

Bulletin No. 2026–14

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

i

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statement of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

March 30, 2026

Numerical Finding List1

Bulletin 2026–14

Announcements:

2026-1, 2026-04 I.R.B. 402

2026-2, 2026-05 I.R.B. 447

2026-3, 2026-06 I.R.B. 518

2026-4, 2026-06 I.R.B. 533

2026-5, 2026-07 I.R.B. 540

2026-6, 2026-10 I.R.B. 634

2026-7, 2026-11 I.R.B. 697

Notices:

2026-2, 2026-02 I.R.B. 304

2026-3, 2026-02 I.R.B. 307

2026-5, 2026-02 I.R.B. 309

2026-6, 2026-02 I.R.B. 313

2026-1, 2026-04 I.R.B. 365

2026-8, 2026-04 I.R.B. 368

2026-10, 2026-04 I.R.B. 378

2026-11, 2026-06 I.R.B. 491

2026-12, 2026-06 I.R.B. 496

2026-13, 2026-06 I.R.B. 499

2026-9, 2026-07 I.R.B. 534

2026-7, 2026-11 I.R.B. 637

2026-14, 2026-11 I.R.B. 654

2026-15, 2026-11 I.R.B. 658

2026-16, 2026-11 I.R.B. 685

2026-17, 2026-12 I.R.B. 698

2026-4, 2026-13 I.R.B. \726

Revenue Procedures:—Continued

2026-9, 2026-04 I.R.B. 393

2026-10, 2026-04 I.R.B. 394

2026-12, 2026-07 I.R.B. 535

2026-13, 2026-09 I.R.B. 563

2026-11, 2026-12 I.R.B. 707

2026-15, 2026-13 I.R.B. 729

2026-16, 2026-13 I.R.B. 733

Revenue Rulings:

2026-1, 2026-02 I.R.B. 299

2026-2, 2026-03 I.R.B. 342

2026-3, 2026-06 I.R.B. 485

2026-4, 2026-06 I.R.B. 487

2026-5, 2026-08 I.R.B. 542

2026-6, 2026-11 I.R.B. 635

Treasury Decisions:

10042, 2026-03 I.R.B. 320

10041, 2026-04 I.R.B. 360

10039, 2026-05 I.R.B. 403

10040, 2026-05 I.R.B. 416

Proposed Regulations:

REG-101952-24, 2026-03 I.R.B. 345

REG-110519-25, 2026-03 I.R.B. 353

REG-132251-11; REG-134219-08,

2026-03 I.R.B. 358

REG-103430-24, 2026-05 I.R.B. 447

REG-112829-25, 2026-05 I.R.B. 452

REG-113515-25, 2026-05 I.R.B. 455

REG-121244-23, 2026-09 I.R.B. 579

REG-105064-25, 2026-13 I.R.B. 735

REG-108921-25, 2026-13 I.R.B. 756

REG-117002-25, 2026-13 I.R.B. 761

REG-117270-25, 2026-13 I.R.B. 772

REG-117298-21, 2026-14 I.R.B. 784

Revenue Procedures:

2026-1, 2026-01 I.R.B. 1

2026-2, 2026-01 I.R.B. 119

2026-3, 2026-01 I.R.B. 143

2026-4, 2026-01 I.R.B. 160

2026-5, 2026-01 I.R.B. 258

2026-6, 2026-02 I.R.B. 314

2026-7, 2026-02 I.R.B. 316

2026-8, 2026-04 I.R.B. 380

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin

2024–52, dated December 22, 2024.

1

March 30, 2026

ii

Bulletin No. 2026–14

Finding List of Current Actions on

Previously Published Items1

Bulletin 2026–14

A cumulative list of all revenue rulings, revenue procedures, Treasury decisions, etc., published in Internal Revenue Bulletins 2025–27 through 2025–52 is in Internal Revenue Bulletin

2024–52, dated December 22, 2024.

1

Bulletin No. 2026–14

iii

March 30, 2026

Internal Revenue Service

Washington, DC 20224

Official Business

Penalty for Private Use, $300

INTERNAL REVENUE BULLETIN

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