2013 Maryland Code
STATE FINANCE AND PROCUREMENT
§ 8-131 - Refunding outstanding bonds

§8-131.

(a) Subject to the limitations in this section, the Board of Public Works may issue new bonds to refund its outstanding bonds.

(b) The power to issue bonds under this section is in addition to any other power to borrow.

(c) The Board may issue bonds under this section only for:

(1) the public purpose of realizing for the State a savings in the total cost of debt service on a direct comparison or present value basis; or

(2) the public purpose of debt restructuring that reduces the total cost of debt service.

(d) The Board may:

(1) provide that bonds under this section be in 1 or more series; and

(2) vary the amount of the series.

(e) The total principal amount of the bonds issued under this section may exceed the total principal amount of the bonds that are being refunded.

(f) Bonds that are being refunded and that are subject to redemption before their stated dates of maturity may be called for redemption:

(1) on the earliest redemption date; or

(2) at a later date that the Board determines.

(g) (1) The Treasurer shall invest and apply proceeds of a sale of bonds issued under this section to ensure that the principal and redemption premium of, and interest on, the bonds that are being refunded will be paid in full when due.

(2) The Treasurer may deposit any part of the proceeds of the sale of bonds issued under this section in a trust fund with a trust company or other banking institution, in the name of the State.

(3) The trustee may invest and reinvest money in the trust fund in:

(i) obligations of the United States;

(ii) obligations guaranteed by the United States;

(iii) certificates of deposit or time deposits secured by an obligation of the United States;

(iv) certificates of deposit or time deposits secured by an obligation guaranteed by the United States; or

(v) any obligation or other investment described in § 6-222(a) of this article.

(4) Interest, income, and profits on the investment may be applied in any lawful manner, including to the payment of:

(i) the bonds that are being refunded; and

(ii) the bonds issued under this section.

(5) The trustee shall make money in the trust fund available, as the Board requires, for the payment of:

(i) the principal and redemption premium of, and interest on, the bonds that are being refunded;

(ii) the principal and redemption premium of, and interest on, the bonds issued under this section; or

(iii) any other related costs.

(6) The Comptroller shall account for the proceeds of a sale of bonds issued under this section as nonbudgeted funds.

(h) All or any part of the bonds issued under this section may be made payable from and secured by:

(1) money in the Annuity Bond Fund established under § 8-132 of this subtitle; or

(2) other money or security that the State provides.

(i) Nothing in this section shall prevent issuance and sale of refunding bonds the interest on which is not excludable from gross income for federal income tax purposes.

§ 8-131 - 1. Establishment and maintenance of exclusion from gross income interest on State bonds

(a) Definitions. --

(1) In this section the following words have the meanings indicated.

(2) "Code" means the Internal Revenue Code of 1986 and includes regulations and rulings issued under that Code.

(3) "Proceeds" means moneys received from the sale of State bonds, and includes any moneys deemed to be proceeds of State bonds under the Code.

(b) Establishment and maintenance of funds and accounts. -- The Treasurer and the Comptroller shall establish and maintain funds and accounts for the administration, management, investment and accounting of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on State bonds.

(c) Management and investment of proceeds. -- The Treasurer shall manage and invest proceeds, including any investment earnings on proceeds, in a manner so as to maintain the exclusion from gross income for federal income tax purposes of interest on State bonds. The Treasurer shall restrict the yields on investments of proceeds if and to the extent necessary to maintain the exclusion from gross income for federal income tax purposes of interest on State bonds.

(d) Preparation and maintenance of records. -- The Treasurer and the Comptroller shall prepare and maintain records of the receipt, deposit, investment, management, disbursement and application of proceeds, including any investment earnings on proceeds, that may be necessary or appropriate from time to time to comply with the Code and to maintain or verify the exclusion from gross income for federal income tax purposes of interest on State bonds.

(e) Rebate fund. -- The Treasurer shall establish a separate rebate fund to be used to make any payments to the United States with respect to investment earnings on proceeds that may be required from time to time by the Code. There may be separate accounts within the rebate fund. Amounts deposited to the rebate fund shall be used only for the purpose of making rebate payments to the United States. The Treasurer shall make payments from the rebate fund as may be required from time to time in order to comply with the Code and to maintain the exclusion from gross income for federal income tax purposes of interest on State bonds. Any excess moneys held in the rebate fund with respect to an issue of State bonds after all required rebate payments for that issue have been made, as certified by the Treasurer, shall be deposited in the General Fund.

(f) Preparation and filing of forms, information, etc. -- The Treasurer and the Comptroller shall prepare and file from time to time with the appropriate agency of the United States any forms, information, and reports with respect to State bonds and the expenditure and investment of proceeds that may be required under the Code.

(g) Other powers and duties of Board, Treasurer, and Comptroller. -- For purposes of doing whatever is necessary or appropriate from time to time to comply with the Code and to establish or maintain the exclusion from gross income for federal income tax purposes of interest on State bonds, the Board, the Treasurer, and the Comptroller shall each:

(1) take any other or further actions;

(2) enter into any agreement or covenant regarding the use of proceeds, including any investment earnings on proceeds, the deposit of moneys to the rebate fund and the making of rebate payments; and

(3) provide certifications of facts and estimates.

(h) State bonds for which interest is not excludable authorized. -- This section does not prevent the Board from authorizing the issuance and sale of State bonds the interest on which is not excludable from gross income for federal income tax purposes if the Board in its authorizing resolution finds that to be in the best interests of the State.

§ 8-131 - 2. Exemption from taxation [Effective October 1, 2013].

The State bonds, the transfer of State bonds, the interest payable on State bonds, and any income derived from State bonds, including profit realized in the sale or exchange of State bonds, are exempt from State and local taxes.