# Qualified zone academy bonds (temporary).
**AGENCY:**
Internal Revenue Service (IRS), Treasury.
**ACTION:**
Correcting amendment.
**SUMMARY:**
This document contains a correction to final and temporary regulations (TD 9339) that were published in the *Federal Register* on Friday, September 14, 2007 (72 FR 52470) providing guidance to state and local governments that issue qualified zone academy bonds and to banks, insurance companies, and other taxpayers that hold those bonds on the program requirements for qualified zone academy bonds.
**DATES:**
The correction is effective October 24, 2007.
**FOR FURTHER INFORMATION CONTACT:**
Timothy L. Jones or Zoran Stojanovic, (202) 622-3980 (not a toll-free number).
**SUPPLEMENTARY INFORMATION:**
**Background**
The final and temporary regulations (TD 9339) that are the subject of this correction are under section 1397E of the Internal Revenue Code.
**Need for Correction**
As published, final and temporary regulations (TD 9339) contain an error that may prove to be misleading and are in need of clarification.
**List of Subject in 26 CFR Part 1**
Income taxes, Reporting and recordkeeping requirements.
**26 CFR Part 1**
**Correction of Publication**
Accordingly, 26 CFR part 1 is corrected by making the following amendment:
**PART 1—INCOME TAXES**
*Paragraph 1.* The authority citation for part 1 continues to read, in part, as follows:
**Authority:**
26 U.S.C. 7805 * * *
**26 CFR Part 1**
*Par. 2.* Section 1.1397E-1T is amended by revising paragraph (i)(6) to read as follows:
§ 1.1397E-1T
(i) * * *
(6) *Certain defeasance escrow earnings.* With respect to a defeasance escrow established in a remedial action for an issue of QZABs that meets the special rebate requirement under paragraph (h)(7)(ii)(C)( *2* ) of this section, the QZAB issuer is treated as ineligible for the small issuer exception to arbitrage rebate under section 148(f)(4)(D) and paragraph (i)(5) of this section and compliance with that special rebate requirement is treated as satisfying applicable arbitrage investment restrictions under section 148 for that defeasance escrow.
LaNita Van Dyke,
Chief, Publications and Regulations Branch, Legal Processing Division, Associate Chief Counsel (Procedure and Administration).