Applying Spending Exception
The Regulations offer certain exceptions to the arbitrage rebate rules if the proceeds of a bond issue are spent within a specific time frame. All or a portion of the proceeds of the Bonds may qualify for certain exceptions to the rebate requirement (the 6-month, 18-month or 2-year spending exceptions). If these proceeds and the earnings on the proceeds are spent in accordance with the specified requirements, the spending exceptions are available to be applied to all or a portion of the Bonds.
Spending exceptions to rebate are optional and, as a result, are only beneficial if these proceeds are generating a positive rebate liability. Therefore, it is necessary to first determine the rebate liability for these funds and then, if appropriate, apply the spending exception. With the exception of the six-month spending exception, we will evaluate the application of the spending exceptions after the second anniversary date of the bond were issued to see if an exception would reduce or eliminate the rebate liability.