Form 8038-R: Request for Recovery of Overpayment Under Arbitrage Rebate Provisions

Form 8038-R: Request for Recovery of Overpayment Under Arbitrage Rebate Provisions

Form 8038-R is an important document for issuers of tax-exempt bonds who are seeking to recover an overpayment made under the arbitrage rebate rules. This form is filed to request the refund of the amount of arbitrage rebate that has been overpaid, ensuring that bond issuers are not penalized for paying more than required under IRS guidelines.

In this guide, we will walk through Form 8038-R, explaining when and how to file it, what information it requires, and the process involved in recovering any overpaid arbitrage rebate.

What is Form 8038-R?

Form 8038-R is an IRS form used by issuers of tax-exempt bonds to request the recovery of overpaid arbitrage rebate. Arbitrage rebate is the amount of money that bond issuers are required to pay to the U.S. Treasury if they earn a higher yield on bond proceeds than the bond’s yield.

If an issuer has overpaid the arbitrage rebate—meaning they have paid more than what was required—Form 8038-R is used to request the return of the excess payment.

The form helps the IRS assess and process the request for the refund and ensures the correct amount is returned to the issuer.

Who Must File Form 8038-R?

Issuers of tax-exempt bonds who have made an overpayment of arbitrage rebate must file Form 8038-R to recover the overpaid amount. The form is generally filed by:

1. State and Local Governments:

   • These entities may issue tax-exempt bonds and may need to pay arbitrage rebates if they invest bond proceeds in higher-yielding securities.

2. Qualified Bond Issuers:

   • The form is for issuers who have bond issues subject to the arbitrage rebate rules, such as municipal bonds, that do not meet the exceptions allowing for arbitrage retention.

3. Overpayment of Arbitrage Rebate:

   • If the bond issuer finds that they have paid more arbitrage rebate than necessary, they must use Form 8038-R to request a recovery of the overpayment.

When to File Form 8038-R?

Form 8038-R should be filed when an issuer has made an overpayment of arbitrage rebate and seeks to recover the excess amount. There are specific circumstances where the filing is required:

1. Filing After Completing the Final Rebate Calculation:

   • Issuers must first calculate the final arbitrage rebate for their bonds before requesting any recovery of overpayments. If the issuer has paid more than what is owed, they can then file Form 8038-R.

2. Filing Deadline:

   • Form 8038-R should be filed within three years from the due date of the last rebate payment, or within three years after the final payment is made, whichever is later.
   • For example, if the final rebate payment was due in 2020, and the issuer made an overpayment, they must file Form 8038-R by 2023 to claim the refund.

Key Information Required on Form 8038-R

When filing Form 8038-R, issuers must provide a variety of information to assist the IRS in verifying the overpayment of arbitrage rebate. Key details required on the form include:

1. Issuer Information:

   • Name of Issuer: The name of the entity that issued the tax-exempt bonds.
   • Employer Identification Number (EIN): The unique IRS number assigned to the issuer.
   • Issuer’s Address: The address of the issuer, including city, state, and ZIP code.
   • Contact Information: The name and contact details of the person responsible for the bond issuance and filing.

2. Bond Issue Information:

   • Name of the Bond Issue: The specific name or description of the bond issue for which the rebate overpayment occurred.
   • Bond Issue Date: The date the bonds were issued.
   • Bond Yield: The yield on the bond issue, which is necessary to determine the amount of arbitrage rebate due.

3. Rebate Payment Information:

   • Amount of Overpayment: The amount of arbitrage rebate that was overpaid.
   • Total Rebate Payments Made: The total amount of arbitrage rebate payments that the issuer has made for the bond issue.
   • Excess Overpayment: The difference between the amount of rebate paid and the amount actually owed.

4. Rebate Recovery Request:

   • Refund Request: The form includes a section where the issuer requests the return of the excess overpayment.
   • Reason for Overpayment: If applicable, the issuer may need to provide an explanation for why the overpayment occurred.

5. Other Required Documents:

   • Supporting Documentation: The issuer may need to provide additional supporting documents, such as a copy of the final rebate calculation or other proof of the overpayment.

Filing and Submission Process

1. Gather Required Information:

   • Before completing Form 8038-R, issuers should gather all necessary documentation, including the total rebate payments made, the bond’s yield, and the amount of overpayment.

2. Complete the Form:

   • Fill out the form carefully, ensuring that all required fields are completed accurately. Provide the requested details about the bond issue, the overpayment, and the amount being requested for recovery.

3. Submit the Form:

   • Once completed, Form 8038-R must be submitted by mail to the IRS. The correct address for submission is listed in the instructions on the form.

4. Record Keeping:

   • Retain a copy of the form and all supporting documents for your records. This will help in case the IRS needs further clarification or if you are subject to an audit.

Penalties for Non-Filing or Late Filing

Issuers who fail to file Form 8038-R on time or do not correctly report the necessary information may face penalties:

1. Late Filing Penalties:

   • The IRS may impose a penalty for late filing if Form 8038-R is not filed within the required timeframe. The penalty can be up to $25 per day for each day the form is late, up to a maximum of $1,000.

2. Inaccurate Information:

   • Issuers must ensure that the amount of overpayment is reported accurately. If there is an error or discrepancy in the form, the issuer may face delays in receiving the refund, or they may need to file an amended form.

Conclusion

Form 8038-R is a vital tool for issuers of tax-exempt bonds who have made an overpayment under the arbitrage rebate provisions. By filing this form, issuers can recover the excess payment and ensure that they are in full compliance with the IRS regulations regarding bond issuance.