103 STAT. 2384 PUBLIC LAW 101-239—DEC. 19, 1989 "(i) IN GENERAL.—Such term shall not mclude any bond issued as part of an issue 95 percent of the net proceeds of which are invested in bonds— "(I) the interest on which is not includible in gross income under section 103, and "(II) which are not specified private activity bonds (as defined in section 57(a)(5)(C)). "(ii) AMOUNTS IN BONA FIDE DEBT SERVICE FUND.— Amounts in a bona fide debt service fund shall be treated as invested in bonds described in clause (i). "(iii) INVESTMENT EARNINGS HELD PENDING REINVEST- MENT.—Investment earnings held for not more than 30 days pending reinvestment shall be treated as invested . in bonds described in clause (i). "(C) EXCEPTION FOR REFUNDING BONDS. — "(i) IN GENERAL. —A refunding bond shall be treated as meeting the requirements of this subsection only if the original bond met such requirements. "(ii) GENERAL RULE FOR REFUNDING OF PRE-EFFECTTVE DATE BONDS.—A refunding bond shall be treated as meeting the requirements of this subsection if— (I) this subsection does not apply to the original bond, "(II) the average maturity date of the issue of which the refunding bond is a part is not later than the average maturity date of the bonds to be re- funded by such issue, and "(III) the amount of the refunding bond does not exceed the outstanding amount of the refunded bond, "(iii) REFUNDING OF PRE-EFFECTTVE DATE BONDS ENTI- TLED TO 5-YEAR TEMPORARY PERIOD.— A refunding bond shall be treated as meeting the requirements of this subsection if— "(I) this subsection does not apply to the original bond, "(II) the issuer reasonably expected that 85 per- cent of the spendable proceeds of the issue of which the original bond is a part would be used to carry out the governmental purposes of the issue within the 5-year period beginning on the date the origi- nal bonds were issued but did not reasonably expect that 85 percent of such proceeds would be so spent within the 3-year period beginning on such date, and "(III) at least 85 percent of the spendable pro- ceeds of the original issue (and all other prior original issues issued to finance the governmental purposes of such issue) were spent before the date the refunding bonds are issued. "(4) SPECIAL RULES.— For purposes of this subsection— "(A) CONSTRUCTION PERIOD IN EXCESS OF 5 YEARS. — The Secretary may, at the request of any issuer, provide that the requirement of paragraph (2) shall be treated as met with respect to the portion of the spendable proceeds of an issue which is to be used for any construction project having a construction period in excess of 5 years if it is
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