Form 8038-TC: Information Return for Tax Credit Bonds and Specified Tax Credit Bonds

Form 8038-TC: Information Return for Tax Credit Bonds and Specified Tax Credit Bonds

Form 8038-TC is an essential form for issuers of Tax Credit Bonds (TCBs) and Specified Tax Credit Bonds (STCBs). This form helps the IRS track the issuance of these specialized bonds, ensuring that the tax credits are properly reported and compliance is maintained under the Internal Revenue Code.

In this article, we will explain the purpose of Form 8038-TC, who must file it, when to file it, and how to complete the form.

What is Form 8038-TC?

Form 8038-TC is an information return required for Tax Credit Bonds and Specified Tax Credit Bonds. These bonds are used as a mechanism to provide federal tax credits to investors instead of paying interest. The IRS uses Form 8038-TC to collect data about these bonds, including the issuance details and the tax credits allocated to the bondholders.

There are two main types of tax credit bonds that require the filing of Form 8038-TC:

1. Tax Credit Bonds (TCBs):
   • These bonds are issued by state and local governments or other eligible issuers to provide tax credits to bondholders, typically in lieu of traditional interest payments. The credit is received by bondholders and applied to their federal taxes.
2. Specified Tax Credit Bonds (STCBs):
   • STCBs are bonds issued for specific purposes, such as for renewable energy projects, clean water initiatives, or other government programs, and they provide tax credits to bondholders. These bonds are also reported on Form 8038-TC.

The information gathered via this form allows the IRS to track the tax credit allocations and ensure compliance with bond issuance requirements.

Who Must File Form 8038-TC?

The issuer of Tax Credit Bonds or Specified Tax Credit Bonds is required to file Form 8038-TC. This includes:

1. State and Local Governments:

   • State and local governments often issue tax credit bonds to finance public projects, like infrastructure, environmental initiatives, or economic development, and are required to file the form.

2. Qualified Bond Issuers:

   • Any government or organization that issues bonds with the intention of providing tax credits to investors must file Form 8038-TC.

3. Bonds Providing Tax Credits:

   • The issuer must file the form when they issue tax credit bonds or specified tax credit bonds, which are specifically designed to provide a tax credit to bondholders.

When is Form 8038-TC Due?

Form 8038-TC must be filed within a specific period following the issuance of the bonds. The form is due within 15 days after the end of the calendar quarter in which the bonds are issued.

For example, if the bonds are issued on May 10, 2025, the form would need to be filed by July 15, 2025 (15 days after the end of the quarter in which the bonds were issued).

Additionally, if Form 8038-TC is filed late, the IRS may impose penalties, so it’s important to submit the form promptly to avoid unnecessary fees.

Key Information Required on Form 8038-TC

When filing Form 8038-TC, issuers will need to provide the following information:

1. Issuer Information:

   • Name of Issuer: The name of the entity issuing the bonds.
   • Employer Identification Number (EIN): The unique IRS number assigned to the issuer.
   • Issuer’s Address: The address, including city, state, and ZIP code.
   • Contact Information: The contact person and details for correspondence.

2. Bond Issue Information:

   • Name of the Bond Issue: The specific name or description of the bond issue.
   • Bond Issuance Date: The date when the bonds were issued.
   • Bond Type: Whether the bonds are Tax Credit Bonds (TCBs) or Specified Tax Credit Bonds (STCBs).
   • Bond Yield: The yield on the bonds at the time of issuance.

3. Tax Credit Information:

   • Amount of Tax Credits: The total value of the tax credits provided to bondholders.
   • Credit Type: Specify whether the bond is providing a federal tax credit in lieu of interest payments or for another purpose.
   • Total Amount of Bonds Issued: The total amount of bonds issued during the reporting period.

4. Bond Redemption Information:

   • Redemption Dates: The dates on which the bonds are expected to be redeemed or repaid.
   • Credit Allocation: Detailed information on how the tax credits are being allocated among bondholders.

5. Compliance and Certifications:

   • Compliance Affirmation: Issuers must confirm that they are complying with IRS requirements regarding tax credit bonds.
   • Penalties and Fees: Issuers should be aware of any potential penalties for failure to file or for filing incorrectly.

Filing and Submission Process

1. Prepare the Information:

   • Before completing Form 8038-TC, gather all necessary documentation related to the bond issuance, including bond yields, tax credit allocations, bondholder information, and redemption details.

2. Complete the Form:

   • Carefully complete Form 8038-TC, ensuring that all required fields are filled in accurately. Double-check that the information related to tax credits and bond issuance is precise.

3. Submit the Form:

   • After completing the form, submit it to the IRS. The form must be submitted by mail to the appropriate address provided in the form’s instructions.

4. Record-Keeping:

   • Retain a copy of the completed form and supporting documentation for your records. It’s important to have these documents on hand in case the IRS requests additional information or if the bond issue undergoes an audit.

Penalties for Non-Filing or Incorrect Filing

Failure to file Form 8038-TC or filing it incorrectly can result in penalties, including:

1. Late Filing Penalties:

   • If the form is filed late, the IRS may impose a penalty of $25 per day for each day the form is late, with a maximum penalty of $1,000.

2. Incorrect Information:

   • If incorrect information is provided on the form, the issuer may face additional delays in processing or be required to submit amended forms. The IRS may also impose further penalties if the errors are significant.

Conclusion

Form 8038-TC is an essential filing for issuers of Tax Credit Bonds (TCBs) and Specified Tax Credit Bonds (STCBs). It helps ensure compliance with IRS regulations and allows the IRS to track and verify tax credit allocations provided to bondholders. By filing Form 8038-TC on time and with accurate information, issuers can avoid penalties and remain in good standing with the IRS.