Official Action / Intent
The evidence of official intent of the Issuer (or the conduit borrower if it is a 501(c)(3) organization) to reimburse expenditures with proceeds of the bonds.
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Reimbursement
Issuers often advance their own funds to pay project costs prior to the issuance of Bonds in anticipation of reimbursement with Bond proceeds after the Bonds are issued. Under the Bond documents, the effect of the reimbursement is that the Tax-Exempt Bond proceeds are released to the Issuer immediately, and the Issuer will want to use them without regard for the tax rules and the limits under the Bond documents that apply to Tax-Exempt Bond proceeds. The question that arises, then, is whether the reimbursement qualifies as an expenditure of Tax-Exempt Bond proceeds for federal income tax purposes (a question that does not depend on whether or not the actual dollars are released to the Issuer), which would allow those amounts to cease to be treated as proceeds of the Bonds and thus would no longer be subject to the Arbitrage and Rebate rules and other restrictions as to use of proceeds. Treasury Regulations Section 1.150-2 sets forth detailed rules for determining whether a reimbursement qualifies as an expenditure for federal income tax purposes. In general, the expenditure must be a capital expenditure, the Issuer or the Conduit Borrower (but only if it is a 501(c)(3) Organization), in most cases, must have already declared its intent to reimburse itself with the Tax-Exempt Bond proceeds and certain expenditure timing requirements must be met.
In order for the reimbursement allocation to qualify as an expenditure of proceeds for federal income tax purposes, there must be an Official Action adopted not more than sixty days after the reimbursed expenditure, and the reimbursement with Bond proceeds must occur not later than eighteen months after the later of (i) the date on which the original expenditure was paid, or (ii) the date on which the property was placed in service (or abandoned). In addition, the reimbursement cannot be more than three years (extended to five years in certain cases) after the date on which the original expenditure was paid. Preliminary Expenditures not exceeding 20% of the Issue Price of the reimbursement Bond Issue, Costs of Issuance and a de minimis amount not to exceed the lesser of $100,000 or 5% of the proceeds of the Bond Issue, may be reimbursed without regard to the timing and Official Action requirements. Working capital expenditures cannot be reimbursed.
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Escrow Trustee (Agent)
The custodian of funds held in the escrow fund and responsible for holding and managing the escrow fund, including any investments in the escrow fund, up to and including the date when the refunded bonds mature or redeemed, whichever is earlier.