Base Offering Circular - Multifamily 482090 31 meets the test for qualified stated interest, the income on such Securities will be accounted for under the rules applicable to VRDI Securities described above. The OID Regulations are unclear as to the treatment of a Variable Rate Security that is issued at an Excess Premium.  Unless and until the Service provides contrary administrative guidance on the income tax treatment of such Securities, the Tax Administrator intends to account for such Securities as described in “—Interest Weighted Securities and Non-VRDI Securities.”  Holders of such Securities should be aware, however, that some other method of tax accounting ultimately might be determined to apply. Interest Weighted Securities and Non-VRDI Securities The treatment of a Variable Rate Security that is issued at an Excess Premium, any other Variable Rate Security that does not qualify as a VRDI (including a Weighted Average Security with significantly frontloaded or backloaded interest) (either, a “Non-VRDI Security”) or an Interest Weighted Security is unclear under current law.  The OID Regulations contain provisions (the “Contingent Payment Regulations”) that address the federal income tax treatment of debt obligations with one or more contingent payments (“Contingent Payment Obligations”).  Under the Contingent Payment Regulations, any variable rate debt instrument that is not a VRDI is classified as a Contingent Payment Obligation.  However, the Contingent Payment Regulations, by their terms, do not apply to REMIC regular interests (such as the Regular Securities) and other instruments that are subject to Code section 1272(a)(6).  In the absence of further guidance, the Tax Administrator will account for Non-VRDI Securities and Interest Weighted Securities in accordance with Code section 1272(a)(6) and the accounting methodology described in this paragraph.  Income will be accrued on such Securities based on a constant yield that is derived from a projected payment schedule as of the Closing Date.  The projected payment schedule will take into account the Pricing Prepayment Assumptions and the other assumptions described below.  To the extent that actual payments differ from projected payments, appropriate adjustments to interest income and expense accruals will be made in a manner corresponding to that described for VRDIs in “—Variable Rate Securities.”  Where the Regular Security is a Weighted Average Security with front- or back-loaded interest, an Interest Weighted Security, or a Variable Rate Security issued with an Excess Premium, the Tax Administrator will derive the projected payment schedule based on the assumption that, in the case of such a Weighted Average Security, the Security’s weighted average rate in effect on the Closing Date will remain unchanged for the life of the Security and, in the case of an Interest Weighted Security or a Variable Rate Security with Excess Premium, that the interest rate or rate parameters on which the interest entitlement of the Security is based will remain unchanged for the life of the Security. In the case of an Interest Weighted Security having no principal entitlement that is “out of the money” as of the Closing Date (i.e., one on which no payments would be made if the related index or indices were not to change), no income will be accrued in any period other than a period in which a payment becomes due.  All payments received on such a Security effectively will be treated as returns of capital to the extent of the Holder’s basis in the Security and thereafter will be treated as ordinary income to the Holder in the period in which such payments became due. As a technical matter, the Tax Administrator will describe any income accrued on Interest- Weighted Securities and Non-VRDI Securities as OID, rather than interest income.