Issue Title: Requirement to Spend Available Project Proceeds of Qualified Tax Credit Bonds within 3 Years of Date of Issuance Description: Qualified tax-credit bonds have requirements on how much of the proceeds must be spent on a qualified use and when the proceeds must be used for that qualified use. In certain cases, if the issuer fails to meet these spending requirements, it may remedy that failure by taking certain actions. This issue snapshot discusses the spending rules and the permitted remediation for these bonds. IRC Sections and Treas. Regulations: IRC Section 54A, Credit to Holders of Qualified Tax Credit Bonds IRC Section 54B, Qualified Forestry Conservation Bonds; IRC Section 54C, New Clean Renewable Energy Bonds; IRC Section 54D, Qualified Energy Conservation Bonds; IRC Section 54E, Qualified Zone Academy Bonds: and IRC Section 54F, Qualified School Construction Bonds. Resources (Court Cases, Chief Counsel Advice, Revenue Rulings, Internal Resources): None. Analysis: IRC Section 54A requires that issuers of qualified tax-credit bonds spend 100 percent of the available project proceeds of the issue by the close of the expenditure period (generally, the 3-year period beginning on the date of issuance) for 1 or more qualified purposes. To the extent that less than 100 percent of the available project proceeds are expended by the close of such period (including any extensions) for such purposes, the issuer must redeem all of the nonqualified bonds within 90 days after the end of such period. Determining whether proceeds were used for qualified purposes within the applicable expenditure period requires determination of (1) the “available project proceeds,” (2) when those proceeds were spent, (3) the expenditures to which those proceeds were allocated, and (4) when the expenditure period ended. “Available project proceeds” is defined in IRC Section 54A as: (A) the excess of— (i) the proceeds from the sale of an issue, over (ii) the issuance costs financed by the issue (to the extent that such costs do not exceed 2 percent of such proceeds), and (B) the proceeds from any investment of the excess described in subparagraph (A). Timing of expenditures. Generally, an allocation of available project proceeds to an expenditure involves a current outlay of cash (not necessarily the proceeds) for a qualified purpose of the issue. Qualified purposes. The expenditures to which the available project proceeds are allocated must be qualified purposes for the applicable type of bond issue, as provided in the Code section relating to the applicable bond type. When the allocation period ends. For qualified tax credit bonds, 100% of the available project proceeds must be spent for a qualified purpose within 3 years of the date the bonds were issued. An issuer may be able to get an extension of the allocation period. Upon submission of a request prior to the expiration of the expenditure period (determined without regard to any extension), the Secretary may extend such period if the issuer establishes that the failure to expend the proceeds within the original expenditure period is due to reasonable cause and the expenditures for qualified purposes will continue to proceed with due diligence. Such requests are submitted via private letter ruling request. Extension requests cannot be submitted after the end of the expenditure period. Several private letter rulings have been issued regarding requests for extensions. See, e.g., PLR 201309012; PLR 201326001; PLR 201330003; PLR 201332004; PLR 201420016; PLR 201426022; PLR 201428001; PLR 201445007; PLR 201514005; PLR 201516051; PLR 201531002. Remedies for failure to timely meet the expenditure requirements. To the extent that less than 100 percent of the available project proceeds are expended for qualified purposes by the close of the 3 year period beginning on the date of issuance (or any extension of the period), the issuer must redeem nonqualified bonds within 90 days after the end of such period. The amount of the nonqualified bonds required to be redeemed is determined in the same manner as under IRC Section 142. Issue Indicators or Audit Tips: Look at issuer expenditure records for expenditures made more than 3 years after bond issuance.