4.8.2.1 Categories of Proceeds

For tax purposes, bonds proceeds are categorized as follows:

SALE PROCEEDS – The amounts actually or constructively received by the issuer from the sale of the bonds, including amounts used to pay underwriter’s discount or other compensation and accrued interest, if any (other than pre issuance accrued interest, which was common historically, but has become much less common).

INVESTMENT PROCEEDS – The amounts actually or constructively received from investing the proceeds of a bond issue.

TRANSFERRED PROCEEDS – When the proceeds of a refunding issue are used to make payments of principal on refunded bonds, any unspent proceeds of the refunded bonds “transfer over” to the refunding issue based on a formula set forth in the Regulations, and the unspent proceeds become transferred proceeds of the refunding issue.

REPLACEMENT PROCEEDS – Includes money held by the issuer or a “substantial beneficiary” of the bonds if the amounts have a sufficiently direct relationship to the bond issue or a governmental purpose of a bond issue and the amount invested would be used for a governmental purpose. For example, amounts held in a sinking fund or pledged fund for the bonds would generally be treated as replacement proceeds of the bonds.

GROSS PROCEEDS – All proceeds (sale proceeds, investment proceeds, replacement proceeds, and transferred proceeds) plus amounts that are reasonably expected to be used to repay the bonds, such as revenues deposited in a debt service fund (DSF) and amounts that are pledged as security for the repayment of the bonds (Gross Proceeds).

DISPOSITION PROCEEDS – Amounts received from the sale of all or a portion of a bond financed facility, while the bonds are still outstanding. For arbitrage purposes, disposition proceeds are treated as gross proceeds of the applicable bonds.

NET PROCEEDS – The proceeds (sale proceeds, investment proceeds, and transferred proceeds) of the bonds less the amount of a reasonably required reserve or replacement fund.