Form 8038-B: Information Return for Build America Bonds and Recovery Zone Economic Development Bonds

Form 8038-B: Information Return for Build America Bonds and Recovery Zone Economic Development Bonds

Form 8038-B is an important document for issuers of Build America Bonds (BABs) and Recovery Zone Economic Development Bonds (RZEDBs). These bonds were created to help stimulate economic growth and recovery, particularly after the 2008 financial crisis. Form 8038-B serves as an information return, helping the Internal Revenue Service (IRS) track the use of tax credits associated with these bonds.

If your organization has issued Build America Bonds or Recovery Zone Economic Development Bonds, it is essential to understand the filing requirements for Form 8038-B, including when to file, what information is required, and the potential consequences of non-compliance.

What is Form 8038-B?

Form 8038-B is used by bond issuers to report information about Build America Bonds (BABs) and Recovery Zone Economic Development Bonds (RZEDBs) to the IRS. Both of these bonds are part of U.S. federal economic stimulus efforts:

1. Build America Bonds (BABs): Issued by state and local governments, BABs are taxable bonds where the federal government provides a subsidy to the issuer to offset the cost of interest payments. These bonds are typically issued for purposes like infrastructure development or financing for public projects.

2. Recovery Zone Economic Development Bonds (RZEDBs): These are a form of tax-credit bonds issued to support economic development in specific areas affected by the economic downturn. The IRS provides tax credits to the bondholders, which help reduce the interest costs for the issuer.

Form 8038-B helps ensure compliance with the rules governing these bonds and enables the IRS to track the credit and subsidy programs effectively.

Who Must File Form 8038-B?

The issuer of the Build America Bonds (BABs) or Recovery Zone Economic Development Bonds (RZEDBs) is responsible for filing Form 8038-B. This could be a government entity, such as a city, county, or state authority, or any organization authorized to issue municipal bonds.

1. Entities Required to File:

   • State and local governments that issue BABs or RZEDBs are required to file Form 8038-B with the IRS.
   • Nonprofit organizations or other qualified entities that issue these bonds for approved projects also need to file.

2. Timing of Filing:

   • Form 8038-B is due on or before the 15th day of the 2nd month following the end of the calendar quarter in which the bond was issued.
   • For example, if the bonds were issued in June, the return is due by August 15th of the same year.

3. Multiple Bond Issues:

   • If multiple bond issues were made, separate Form 8038-B filings may be required for each bond issue.

Key Information Required on Form 8038-B

To complete Form 8038-B, the issuer must provide detailed information about the bonds and their issuance. Here’s a breakdown of the key sections and data needed:

1. Issuer’s Information:

   • Name of the issuer (e.g., city, state, or government agency).
   • Employer Identification Number (EIN) of the issuer.
   • The address and contact details for the issuer.

2. Bond Issue Information:

   • Issue date: The specific date the bonds were issued.
   • Issue price: The price at which the bonds were sold.
   • Amount of the issue: The total value of the bonds issued.
   • Bond type: Specify whether the bonds are Build America Bonds (BABs) or Recovery Zone Economic Development Bonds (RZEDBs).
   • Qualified purpose: The purpose for which the bonds were issued, such as financing infrastructure or development projects.

3. Tax Credit and Subsidy Information:

   • Amount of the federal subsidy or tax credits provided to the issuer. For BABs, this is the percentage of the interest payment subsidized by the federal government. For RZEDBs, this is the tax credit provided to bondholders.
   • The taxpayer identification number (TIN) of any party who receives the tax credits or subsidies, if applicable.

4. Compliance Information:

   • The issuer must confirm that the bonds meet the legal and regulatory requirements set forth by the IRS for BABs or RZEDBs.
   • The form may require certification that the bond issuance complies with applicable rules regarding use of proceeds, as well as any relevant bond covenants.

Filing and Submission Process

1. Due Date:

   • As mentioned, Form 8038-B is due on the 15th day of the 2nd month after the issuance of the bonds, meaning that timely filing is important to avoid penalties.

2. Filing Method:

   • The form is typically filed by mail to the IRS at the designated address provided in the instructions for Form 8038-B.
   • The form can also be filed electronically if the issuer is required to file certain returns electronically, but this depends on the circumstances of the issuance.

3. Payment of Taxes:

   • The filing of Form 8038-B does not typically result in a direct tax liability, as these are bonds that qualify for federal subsidies or tax credits. However, accurate filing is necessary to maintain the tax benefits for bondholders and the issuing entity.

4. Recordkeeping:

   • The issuer should keep a copy of the filed form and any related documentation for their records. The IRS may request additional information or clarification regarding the bond issuance in the future.

Consequences of Non-Filing or Late Filing

Failure to file Form 8038-B or file it late can lead to serious consequences, including:

1. Penalties:

   • The IRS can impose penalties for failing to file Form 8038-B by the deadline. The penalty is $25 per day, with a maximum penalty of $1,000 for each bond issue.

2. Loss of Subsidy:

   • If Form 8038-B is not filed, the issuer may lose access to the subsidy or tax credits associated with the bonds. This can lead to higher costs for the issuer.

3. Additional Audits:

   • The IRS may conduct an audit or request further documentation regarding the bond issuance, which could be time-consuming and lead to additional scrutiny of the issuer’s operations.

4. Revocation of Bond Status:

   • Failure to comply with filing requirements can also lead to a revocation of the tax-exempt status of the bonds, which could have significant financial consequences for both the issuer and the bondholders.

Conclusion

Form 8038-B is a crucial filing for entities issuing Build America Bonds (BABs) or Recovery Zone Economic Development Bonds (RZEDBs). It ensures that the IRS can track the use of federal tax subsidies and credits associated with these bonds and ensures compliance with the regulations surrounding their issuance. By filing on time and ensuring that all required information is accurately reported, issuers can avoid penalties and ensure they retain the financial benefits associated with these bonds.