857 



"(g) With respect to any obligation guaranteed under this section, the interest 

 payment paid on sucli obligation and received by the purchaser thereof (or his 

 successor in interest) shall be included in gross income for the purpose of chap- 

 ter 1 of the Internal Revenue Code of 1954. 



"(h) (1) Payments required to be made as a result of any guarantee made 

 under this section shall be made by the Secretary from funds which may be 

 appropriated to the revolving fund established by subsection (i) or from funds 

 obtained from the Secretary of the Treasury and deposited in such revolving 

 fund pursuant to subsection (i) (2). 



"(2) If there is a default by a coastal State or unit of general purpose local 

 government in any payment of principal or interest due under a bond or other 

 evidence of indebtedness guaranteed by the Secretary under this section, any 

 holder of such bond or other evidence of indebtedness may demand payment by 

 the Secretary of the unpaid interest on and the unpaid principal of such ob- 

 Obligation as they become due. Tlie Secretary, after investigating the facts pre- 

 sented by the holder, shall pay to the holder the amount which is due him, unless 

 the Secretary finds that there was no default by the coastal State or unit of 

 general purpose local government or that such default has been remedied. If 

 the Secretary makes a payment under this paragraph, the United States shall 

 have a right of reimbursement against the coastal State or unit of general pur- 

 pose local government for which the payment was made for the amount of such 

 payment plus interest at the prevailing current rate as determined by the Secre- 

 tary. If any revenue becomes due to such coastal State or unit of general pur- 

 pose local government under section 308(a) of this title, the Secretary shall, in 

 lieu of paying such coastal State or unit of general purpose local government 

 such revenue, deposit such revenue in the revolving fund established under sub- 

 section (i) until the right of reimbursement has 'been satisfied. 



"(3) The Attorney General shall, upon request of the Secretary, take such 

 action as may be appropriate to enforce any right accuring to the United States 

 as a result of the issuance of any guarantee under this section. Any sum re- 

 covered pursuant to this paragraph shall be paid into the revolving fund esta'b- 

 lisihed by subsection (i). 



"(i)(l) The Secretary shall establish a revolving fund to provide for the 

 timely payment of any liability incurred as a result of guarantees made under 

 this section, for the payment of costs of administering this section, and for the 

 payment of obligations issued to the Secretary of the Treasury under paragraph 

 (2) of this subsection. This revolving fund shall be comprised of — 



" ( A ) receipts from fees collected under this section ; 



"(B) recoveries under security, subrogation, and other rights; 



"(C) reimbursements, interest income, and any other receipts oibtained in con- 

 nection with guanrantees made under this section ; 



"(D) proceeds of the Obligations issued to the Secretary of the Treasury 

 pursuant to paragraph (2) of this subsection ; and 



"(E) such sums as may be appropriated to carry out the provisions of this 

 section. Funds in the revolving fund not currently needed for the purpose of 

 this sec'tion shall be kept on deposit or invested in obligations of the United 

 States or guaranteed thereby or in oibllgations, participation, or other instru- 

 ments which are lawful investments for fiduciary, trust, or public funds. 



'(2) The Secretary may, for the purpose of carrying out the functions of this 

 section, issue obligations to the Secretary of the Treasury only to such extent 

 or in such amounts as may he provided in appropriation Acts. The obligations is- 

 sued under this paragraph shall have such maturities and bear such rate or rates 

 of interest as shall be determined by the Secretary of the Treasury. The Secretary 

 of the Treasury shall purcha.se any obligation so issued, and for that purpose he 

 is authorized to use as a public debt transaction the proceeds from the sale of any 

 .security issued under the 'Second Liberty Bond Act, and the purpose.? for which 

 securities may be i.ssued under that Act are extended to include purchases of the 

 obligations hereunder. Proceeds obtained by the Secretary from the issuance of 

 obligations under this paragraph shall be deposited in the revolving fund es- 

 •stablished in paragraph (1). 



"(3) There are authorized to be appropriated to the revolving fund such sums 

 as may be necessary to carry out the provisions of this section. 



"(j) No lx)nd or other evidence of indebtedness .shall be guranteed under this 

 section unless the issuer of the evidence of indebtedness and the person holding 

 the note with respect to such evidence of indeptedne.'ss permit the General Ac- 

 counting Office to audit, under rules pre.scribed by the Comptroller General of 



