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Form 8038T: Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate
IRS Form 8038-T is Arbitrage Rebate, Yield Reduction, and Penalty in Lieu of Arbitrage Rebate. Issuers of tax-exempt bonds must use this form to report payments, with rebate payments due within 60 days after a computation date.
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IRS Form 8038T - Arbitrage Rebate, Yield Reduction and Penalty in Lieu of Arbitrage Rebate
IRS Form 8038-T is Arbitrage Rebate, Yield Reduction, and Penalty in Lieu of Arbitrage Rebate. Issuers of tax-exempt bonds must use this form to report payments, with rebate payments due within 60 days after a computation date.
Risk Radar
Scan points- 1Failing to file a separate Form 8038-T for each issue is a critical error requiring immediate correction.
- 2Failing to file a separate Form 8038-T for each bond issue.
- 3Not entering the name of the governmental entity on Line 1 (use issuer's name, not recipient's).
- 4Omitting contact information for the designated officer/employee on Lines 9 and 10.
- 5Failing to check the 'Other' box when reporting periods exceed 24 months.
Plain English
This form tells the IRS about specific payments made by issuers of certain bonds that are exempt from federal taxes. It is used when an issuer rebates profits earned elsewhere or reduces the bond's yield to maintain tax-exempt status. Issuers must file this form for each separate issue of these bonds.
Submission Date
- Filing date: 2021-10-12 22:13:34
- Preparation window: collect IDs, supporting records, and signatures in advance.
- Final review: verify names, dates, and required fields before submission.
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What this form is for
- Use this form when an issuer of tax-exempt bonds or other bonds subject to section 148 must make payments related to arbitrage rebate, yield reduction, or penalty in lieu of arbitrage rebate.
- Do not use Form 8038-T for standard bond interest unless the bond is subject to provisions under section 148 (e.g., mortgage revenue bonds).
- Check Form 8038-T instead when paying investment earnings on amounts in a defeasance escrow established by QZABs issued under section 1397E or section 54E.
Form selector
Use this form or another form?
Yield reduction payments are being made
This form is used to report the payment, which accounts for yield in specific investments.
✓ Check line 14/15 on Form 8038-T
Paying penalty in lieu of arbitrage rebate
This covers payments made either instead of the rebate or to terminate the election to pay that penalty.
✓ Check lines 17/19 on Form 8038-T
Reporting final payment for an issue
The final rebate payment is due within 60 days after the issue is discharged, requiring this form.
✓ Check line 15 or 21 depending on timing.
Deadline or filing window
Rebate payments are due within 60 days following the computation date. Issuers must pay these amounts in installments when computation dates occur at least once every 5 years. An issuer may file an amended return to adjust or add information reported for a prior filing date.
Checklist
What you need before filling it out
Arbitrage Rebate Payment
The actual dollar amount being paid for arbitrage rebate · Lines 13, 14, or 15 (depending on payment type)
Yield Reduction Payments
Dollar amounts related to yield reduction payments · Line 14 or 15
Penalty in Lieu of Rebate Payment
The specific dollar amount paid as penalty · Lines 17 or 19
Final Rebate Due Date
Within 60 days after the issue is discharged · Instructions p.2, Reg. § 1.148-3(e)-(g)
Interest Calculation (Late Interest)
Computation at the underpayment rate under section 6621 · Line 22
Issuer's EIN
The issuer’s employer identification number · Part I, Line 2
Before you submit
- 1Verify the form is dated October 2021 (Rev. 10-2021).
- 2Ensure you have checked the box if this submission relates to an Amended Return.
- 3Confirm that Part I, Line 1 accurately lists your issuer's name.
- 4Double-check that Part I, Line 2 contains the correct Issuer’s EIN.
- 5Verify that all payment amounts are totaled correctly on Part V, Line 23.
- 6Ensure the check or money order is made payable to the “United States Treasury.”
- 7Confirm you have included your issuer's name and address on the payment instrument.
How to file this form
- 1Complete Part I by listing the Issuer’s name, EIN, and number/street address.
- 2Calculate all applicable payments (rebate, yield reduction, penalty) and record them on lines 13, 14, 15, 17, or 19.
- 3Compute any late interest due on Line 22 using the underpayment rate from section 6621.
- 4Combine all amounts onto Part V, Line 23, and enclose a check/money order payable to the United States Treasury.
Known limitations
- 1Mortgage revenue bonds must use a separate Form 8038-T for each issue.
- 2If an issuer is filing to correct errors or change information previously reported, they may file Form 8038-TC along with Form 8038-T.
- 3The rebate requirement is considered met if gross proceeds are spent according to the Oct 06, 2021 Cat. No. 30066E.
- 4For an issue retired within 3 years of issuance, the final rebate payment need not occur before the end of 8 months after the issue date or during the expected period of meeting spending exceptions.
Field map
Compact field-by-field guide
General Info
2 items
Full legal name and taxpayer identification number (SSN or EIN).
Current mailing address.
Details
2 items
Complete all applicable sections of this form according to the official IRS instructions.
Enter the relevant dollar amount if this form involves tax calculation.
Certification
1 items
Read and acknowledge any certifications required by this form.
Signatures
1 items
Sign and date. Unsigned forms cannot be processed.
Almost done reviewing the fields?
Fillable formOpen in Editor->The current edition is Revision October 2021 (Rev. 10-2021); the instructions direct users to IRS.gov/Form8038T for the latest information regarding developments.
What changed or needs a fresh check
- Edition date — confirm Revision October 2021 (Rev. 10-2021)
- OMB Number — confirm 1545-0047
- Mailing address — confirm Center Ogden, UT 84201–0027
- Payment recipient — confirm United States Treasury on the check/money order
- Rebate payment due date — confirm within 60 days after each computation date
- Penalty in lieu of rebate deadline — confirm within 90 days of the end of the applicable spending period
Quick Facts
Downloads
After you file
- 1Keep a copy of Form 8038-T for record keeping.
- 2If errors are found, an issuer may file an amended return to change or add information reported on a previously filed return for the same date of issue.
- 3The final rebate payment is due within 60 days after the issue is discharged.
- 4Penalty in lieu of arbitrage rebate payments must be paid within 90 days of the end of the applicable spending period.
Sources
- SRCInstructions p.1 — Purpose of Form 8038-T is to make arbitrage rebate and related payments for issuers of tax-exempt bonds subject to section 148.
- SRCInstructions p.1 — Issuers must file Form 8038-T to pay the arbitrage rebate, yield reduction payments, or the penalty in lieu of arbitrage rebate.
- SRCInstructions p.2 — An issuer may elect to pay a penalty in lieu of rebating arbitrage if spending requirements for the 2-year exception are not satisfied; this penalty is 1 1/2% of unspent available construction proceeds.
- SRCInstructions p.2 — The final rebate payment for an issue is due within 60 days after the issue is discharged (Regulations section 1.148-3(e) through (g)).
- SRCInstructions p.3 — On Line 1, enter the name of the governmental entity that issued the bonds.
- SRCInstructions p.4 — Comments regarding Form 8038-T can be sent to the Internal Revenue Service Tax Forms and Publications at 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224.
Common confusion points
Who should be listed on Line 1?
Enter the name of the governmental entity that issued the bonds, not the name of the entity receiving the benefit or the eligible taxpayer claiming a tax credit.
→ Check if you are listing the issuer or the beneficiary.
What is the difference between an arbitrage rebate and a penalty in lieu of arbitrage rebate?
The form covers both payments; an election may be made to pay a penalty instead of rebating arbitrage, or to terminate that penalty election.
→ Confirm which payment type(s) you are reporting on Form 8038-T.
When is the final rebate payment due?
It is generally due within 60 days after the issue is discharged, though special rules apply for issues retired within 3 years of issuance.
→ Verify if your issue qualifies for the 3-year retirement exception.
What amount constitutes the penalty in lieu of arbitrage rebate?
The penalty equals 1 1/2% of the available construction proceeds that do not meet the spending requirements.
→ Check Section 148(f)(4)(C)(vii) and Regulations section 1.148-7(k).
How do you terminate the 1 1/2% penalty election?
By paying an amount equal to 3% of the unspent available construction proceeds multiplied by the number of years in the initial temporary period.
→ Confirm this termination payment is made alongside other actions like yield restriction and bond redemption.
What does Line 26 cover?
It requires entering the amount of qualified administrative costs taken into account when computing the rebate amount, per Regulations section 1.148-5(e)(2).
→ Ensure these costs are properly allocated according to regulations.
Workflow map
Related forms and next steps
Before
Current
After
Often used with
⚠ If something goes wrong
- Form 8038-TC (Information Return for Tax Credit Bonds and Specified Tax Credit Bonds) is used when filing an amended return or correcting errors on Form 8038-T.
Questions about IRS Form 8038T
What is IRS Form 8038T used for?
This form tells the IRS about specific payments made by issuers of certain bonds that are exempt from federal taxes. It is used when an issuer rebates profits earned elsewhere or reduces the bond's yield to maintain tax-exempt status. Issuers must file this form for each separate issue of these bonds.
Who must file IRS Form 8038T?
Issuers of tax-exempt bonds and any other bonds subject to section 148 must file Form 8038-T to pay arbitrage rebates, yield reductions, or penalties in lieu of an arbitrage rebate. Additionally, issuers of QZABs issued under sections 1397E or 54E that establish a defeasance escrow must file it to report 100% of the investment earnings.
What information does IRS Form 8038T require?
The form collects details such as the name of the issuing governmental entity (Line 1), information regarding authorized contacts (Lines 9 and 10), and specifics related to penalties, which are detailed in Part IV. For bonds over 24 months, a specific box must be checked, and the number of months since issue must be entered.
When is IRS Form 8038T due?
An issuer must pay rebate payments within 60 days after each computation date. Furthermore, an issuer may file an amended return to change or add information reported on a previously filed Form 8038-T for the same date of issue.
Where do I file IRS Form 8038T?
The IRS mailing address for this form is Center Ogden, UT 84201–0027. If using a designated Private Delivery Service (PDS), the issuer must use the PDS to meet the timely filing/paying rule.
How do I complete IRS Form 8038T?
First, an authorized representative must sign and date Form 8038-T and any applicable certification, printing their name and title. If another person is designated for IRS contact (Lines 9/10), this signature grants consent to the disclosure of return information to that person. Finally, ensure Part IV details any late payments correctly before submitting.
What happens if IRS Form 8038T is filed incorrectly?
For governmental and qualified 501(c)(3) bonds, if a failure to pay does not qualify for a penalty waiver, the issuer will be assessed a penalty equal to 50% of the rebate amount not paid timely plus interest on that amount.
Who should be listed on Line 1?
Enter the name of the governmental entity that issued the bonds, not the name of the entity receiving the benefit or the eligible taxpayer claiming a tax credit. Check if you are listing the issuer or the beneficiary.
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