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Instructions For Form 8038-T 8038-T - Official Federal Forms

Instructions For Form 8038-T Form. This is a national form and can be used in Department Of Treasury .
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Instructions for Form 8038-T (Rev. April 2011) Section references are to the Internal Revenue Code unless otherwise noted. 100 percent of the investment earnings on amounts in the defeasance escrow. Department of the Treasury Internal Revenue Service Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate Exceptions General. A number of exceptions may relieve an issuer of the rebate requirement for all or a part of an issue of bonds. Note. The following exceptions may apply only to a portion of an issue. In such cases, the rebate requirement continues to apply to the portion of the issue not covered by the exception. Small issuer exception. The rebate requirement does not apply to certain bonds issued by governmental units issuing no more than $5 million of bonds in a calendar year. The exception is modified as follows: a governmental unit may issue up to $10 million in bonds after 1997 ($15 million after 2001) per calendar year, provided no more than $5 million of proceeds are used to finance expenditures other than public school capital expenditures. See section 148(f)(4)(D) and Regulations section 1.148-8. 6-month exception. The rebate requirement is considered to be met for gross proceeds of an issue (as defined in Regulations section 1.148-7(c)(3)) if those gross proceeds are spent within 6 months of the issue date. The 6-month exception is the only exception available for refunding issues. See section 148(f)(4)(B) and Regulations section 1.148-7(a) ­ (c). 18-month exception. The rebate requirement is considered to be met for gross proceeds of an issue if those gross proceeds are spent according to an 18-month expenditure schedule measured from the issue date. See Regulations section 1.148-7(a), (b), and (d). 2-year exception. The "available construction proceeds" of a construction issue are treated as meeting the rebate requirement if those proceeds are spent in accordance with a 2-year expenditure schedule measured from the issue date. See section 148(f)(4)(C) and Regulations section 1.148-7(a), (b), and (e)-(j). Exception for certain investments. The rebate requirement generally does not apply to gross proceeds that are invested in certain tax-exempt bonds, certain tax-exempt mutual funds, or certain demand deposit securities purchased directly from the United States Treasury. American LegalNet, Inc. www.FormsWorkFlow.com General Instructions Purpose of Form Under section 148(f), interest on a state or local bond is not tax-exempt unless the issuer of the bond rebates to the United States arbitrage profits earned from investing proceeds of the bond in higher yielding nonpurpose investments. Issuers of tax-exempt bonds and any other bonds subject to the provisions of section 148 must use this form to make arbitrage rebate and related payments. Applicable Regulations General Unless otherwise stated, regulation sections referenced in these instructions are to the 1993 regulations, as amended. Generally, an issuer may apply these regulations to bonds that are outstanding on July 8, 1997. For the 1993 regulations, see T.D. 8476, 1993-2 C.B. 13, and T.D. 8538, 1994-1 C.B. 26. For the 1997 amendments to the 1993 regulations, see T.D. 8718, 1997-1 C.B. 47. The 1992 regulations generally apply to bonds issued before July 1, 1993. For the 1992 regulations, see T.D. 8418, 1992-1 C.B. 29. Mortgage Revenue Bonds Section 143(g)(3) provides special arbitrage rebate rules for qualified mortgage bonds and qualified veterans' mortgage bonds. Under these special rules, issuers may pay the rebate either to mortgagors, or if an election is made before issuance of the bond, to the United States. Use this form only if you have elected to pay the rebate to the United States. Special Rules For rules on computing the arbitrage rebate for mortgage revenue bonds, see Temporary Regulations section 6a.103A-2(i)(4). For rules on computing the arbitrage rebate for bonds subject to section 103(c)(6)(D) of the 1954 Code, see Temporary Regulations section 1.103-15AT, T.D. 8005, 1985-1 C.B. 39, if the issuer has not applied the later regulations. For QZABs issued under section 1397E and section 54E, see Regulations T.D. 9495. Qualified Zone Academy Bonds Issued Under Section 1397E A qualified zone academy bond (QZAB) is a bond issued by a state or local government to finance certain eligible public school purposes. An issuer of QZABs issued under section 1397E or section 54E, if applicable, may establish a defeasance escrow to cure a failure to properly use QZAB proceeds. An issuer must pay 100 percent of the investment earnings on amounts in the defeasance escrow. Use this form to make payments of investment earnings on amounts in defeasance escrows. See Regulations section 1.1397E-1(h)(8)(ii)(C). Note. Use a separate Form 8038-T for each issue. Arbitrage Rebate Computation of Arbitrage Rebate The rebate amount for an issue is based on the difference between the amount actually earned on nonpurpose investments and the amount that would have been earned if those investments had a yield equal to the yield on the issue. Note. Regulations section 1.148-3(b) provides that as of any date, the rebate amount for an issue is the excess of the future value, as of that date, of all receipts on nonpurpose investments over the future value, as of that date, of all payments on nonpurpose investments. The definitions of payments and receipts in Regulations section 1.148-3(d), in part, require inclusion of transactions (including, but not limited to, acquisition, earnings and return of principal) on a date for each nonpurpose investment. Any cash flow representation to the contrary may result in the understatement of rebate amount. Yield reduction payments are determined using payments and receipts as described in Regulations section 1.148-5(b)(1). Cat. No. 30066E Who Must File Issuers of tax-exempt bonds and any other bonds subject to the provisions of section 148 must file Form 8038-T to pay: 1. Arbitrage rebate. 2. Yield reduction payments. 3. The penalty: · In lieu of arbitrage rebate; or · To terminate the election to pay a penalty in lieu of arbitrage rebate. 4. Penalties and interest on the failure to pay on time any amounts in 1-3 above. Issuers of QZABs issued under section 1397E or section 54E, as applicable, that establish a defeasance escrow under the Regulations must file Form 8038-T to pay Penalty in Lieu of Arbitrage Rebate Penalty An issuer may elect to pay a penalty in lieu of rebatin
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