; and (3) by inserting after paragraph (1) the following new paragraphs: (2) Certain private activity bonds An issue is described in this paragraph if any bond (issued as part of such issue) is issued to advance refund a private activity bond (other than a qualified 501(c)(3) bond). (3) Other bonds (A) In general An issue is described in this paragraph if any bond (issued as part of such issue), hereinafter in this paragraph referred to as the refunding bond , is issued to advance refund a bond unless— (i) the refunding bond is only— (I) the 1st advance refunding of the original bond if the original bond is issued after 1985, or (II) the 1st or 2nd advance refunding of the original bond if the original bond was issued before 1986, (ii) in the case of refunded bonds issued before 1986, the refunded bond is redeemed not later than the earliest date on which such bond may be redeemed at par or at a premium of 3 percent or less, (iii) in the case of refunded bonds issued after 1985, the refunded bond is redeemed not later than the earliest date on which such bond may be redeemed, (iv) the initial temporary period under section 148(c) ends— (I) with respect to the proceeds of the refunding bond not later than 30 days after the date of issue of such bond, and (II) with respect to the proceeds of the refunded bond on the date of issue of the refunding bond, and (v) in the case of refunded bonds to which section 148(e) did not apply, on and after the date of issue of the refunding bond, the amount of proceeds of the refunded bond invested in higher yielding investments (as defined in section 148(b)) which are nonpurpose investments (as defined in section 148(f)(6)(A)) does not exceed— (I) the amount so invested as part of a reasonably required reserve or replacement fund or during an allowable temporary period, and (II) the amount which is equal to the lesser of 5 percent of the proceeds of the issue of which the refunded bond is a part or $100,000 (to the extent such amount is allocable to the refunded bond). (B)