To amend the Internal Revenue Code of 1986 to increase the amount of bonds eligible for certain small issuer exceptions, and for other purposes.

Amends the Internal Revenue Code to raise from $5,000,000 to $25,000,000 the threshold amount of tax-exempt bonds that a small governmental unit may issue and still remain within the exception from arbitrage rebate requirements.

Makes the exception from such rebate for construction bonds effective as if included under the Tax Reform Act of 1986. Permits elections concerning such bonds to be made until 180 days after the date of enactment of this Act. States that any rebates paid shall not be refunded.

Increases from $10,000,000 to $25,000,000 the amount of tax-exempt obligations excepted from the pro rata allocation of interest expense of financial institutions to tax-exempt interest for qualified small issuers.

Repeals the five percent unrelated and disproportionate private use rules for private activity bonds.

Provides that a bond shall not be treated as an arbitrage bond by reason of any failure to meet any requirements of temporary period investments if all earnings which would cause such bond to be an arbitrage bond are paid to the United States by the issuer by the required due dates.

Reduces from 100 percent to 90 percent the amount of arbitrage to be rebated to the United States if certain State and local bonds are not to be treated as arbitrage bonds.

Provides that an advance refunding bond will not be tax-exempt if it results in amounts becoming available which are invested in substantially guaranteed higher yielding investments pursuant to a contract entered during a certain period before or after issuance of the bond.