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investment proceeds thereon), over (ii) the amounts in a reasonable required reserve <br />(within the meaning of § 150(a)(3)) for an issue of Recovery Zone Economic <br />Development Bonds be used for qualified economic development purposes. Section <br />14000-3(b)(1)(a) requires that 95 percent or more of the "net proceeds" (as defined in <br />§ 150(a)(3)) of an issue of Recovery Zone Facility Bonds be used for recovery zone <br />property. Section 150(a)(3) defines the term "net proceeds" to mean, with respect to <br />any issue, the proceeds of such issue reduced by amounts in a "reasonably required <br />reserve or replacement fund." For these purposes, § 148(d) provides rules for a <br />reasonably required reserve or replacement fund. <br />Section 148(d)(1) generally provides that a bond shall not be treated as an <br />arbitrage bond solely by reason of the fact that an amount of the proceeds of the issue <br />of which such bond is a part may be invested in higher yielding investments which are <br />part of a reasonably required reserve or replacement fund. The amount of such <br />proceeds shall not exceed 10 percent of the proceeds of such issue unless the issuer <br />establishes to the satisfaction of the Secretary that a higher amount is necessary. <br />Section 148(d)(2) provides that a bond issued as part of an issue shall be treated as an <br />arbitrage bond if the amount of the proceeds from the sale of such issue which is part of <br />any reserve or replacement fund exceeds 10 percent of the proceeds of the issue (or <br />such higher amount which the issuer establishes is necessary to the satisfaction of the <br />Secretary). Section 1.148-2(f) of the Income Tax Regulations provides additional rules <br />regarding reasonably required reserve or replacement funds. <br />.03 INFORMATION REPORTING FOR RECOVERY ZONE BONDS <br />10 <br />