Form 8328: Carryforward Election of Unused Private Activity Bond Volume Cap

IRS Form 8328: Carryforward Election of Unused Private Activity Bond Volume Cap

IRS Form 8328 is used to make a carryforward election of unused private activity bond (PAB) volume cap. This election allows a state or local government to carry forward unused bond authority from one calendar year to the next. Understanding the proper use of Form 8328 is crucial for state and local governments that issue private activity bonds, as it helps maximize the allocation of bond capacity and ensure that unused limits are not lost.

In this article, we’ll explore what Form 8328 is, who needs to file it, how to file it, and why it’s important for both governmental entities and potential bond issuers.

What is IRS Form 8328?

Form 8328, also known as the Carryforward Election of Unused Private Activity Bond Volume Cap, allows a state or local government to carry forward unused private activity bond volume cap from one year to the next. This is particularly useful when a jurisdiction is not able to issue all of its available bonds in a given year but wants to ensure that the unused capacity does not go to waste.

Each year, the federal government sets a limit (volume cap) on the total amount of private activity bonds that may be issued by states and local governments. If a government does not use all of its allocated volume cap for private activity bonds in a given year, Form 8328 can be used to carry forward that unused portion to the following year. This flexibility allows jurisdictions to better plan and manage their bond issuance capacity.

Why Use IRS Form 8328?

The primary reason for using Form 8328 is to maximize the use of private activity bond volume cap. These bonds are typically used for tax-exempt financing for projects such as affordable housing, economic development, and infrastructure projects. The carryforward provision allows governments to preserve unused volume cap for future bond issues, even if the full allocation was not utilized in the current year.

Here are some of the main reasons to file Form 8328:

1. Preserve Bond Capacity: If a state or local government has unused private activity bond volume cap, Form 8328 ensures that this unused capacity is carried over to the next year, giving them additional time to utilize it for qualified projects.

2. Improve Bond Issuance Flexibility: By carrying forward unused capacity, governments can respond more effectively to changing market conditions, economic needs, or opportunities to issue bonds in future years.

3. Maximize Investment: Carrying forward unused volume cap ensures that states and local governments can fund projects without losing access to vital financing options that private activity bonds provide.

Who Needs to File Form 8328?

Form 8328 is required for state or local governments that have been allocated private activity bond volume cap by the federal government but have not used the full amount in a given year. The carryforward election is available to any entity that is responsible for issuing bonds under the Tax Reform Act of 1986, which governs private activity bonds.

Specifically, this form applies to:

1. State and Local Governments: Governments that have been allocated a volume cap for private activity bonds and want to carry forward unused capacity to the next year.

2. Bond Issuers: Entities that may issue private activity bonds and want to make use of carryforward options when they are unable to issue bonds for all of their allocated volume cap during a calendar year.

What Information is Required on Form 8328?

To properly complete Form 8328, state and local governments must provide the following information:

1. Identification Information:

   • Name of the state or local government making the election.
   • Address and contact details for the governmental entity.

2. Year of Election:

   • The year in which the unused volume cap was allocated and for which the carryforward election is being made.

3. Amount of Unused Volume Cap:

   • The total amount of unused private activity bond volume cap from the current year that the government seeks to carry forward.

4. State or Local Allocations:

   • A detailed breakdown of how the unused volume cap was calculated, including the allocation for various projects and programs.

5. Signature:

   • An authorized official from the state or local government must sign the form to certify the election.

How to File Form 8328

Filing Form 8328 is straightforward but requires accuracy in reporting unused bond capacity. Here’s how to file:

1. Complete the Form: Fill in all necessary information about the unused bond volume cap and the carryforward election.

2. Mail the Form: The completed Form 8328 should be submitted to the IRS at the appropriate address indicated on the form’s instructions. Be sure to include all required attachments or supporting documentation.

3. Deadline: Form 8328 must be filed by the end of the calendar year following the year the unused bond volume cap was allocated. This means if you have unused capacity in 2024, the carryforward election must be filed by the end of 2025.

4. Retain Copies for Records: It’s essential to keep a copy of Form 8328 for your records and future reference.

Impact of Filing Form 8328

By filing Form 8328 and electing to carry forward unused private activity bond volume cap, state and local governments can effectively manage their bond issuance capacity. This allows for:

1. Better Planning: Governments can better plan their bond issuance based on future needs and economic conditions, ensuring that unused bond authority is not wasted.

2. Increased Flexibility: Carrying forward unused volume cap provides more time for governments to issue bonds for specific projects, offering greater flexibility for economic development and infrastructure funding.

3. Compliance: Filing Form 8328 ensures compliance with IRS rules governing the allocation and carryforward of unused private activity bond volume cap, preventing any penalties or issues with the IRS.

Penalties for Non-Compliance

Failure to file Form 8328 or incorrectly reporting unused bond capacity could result in penalties. These could include:

1. Loss of Carryforward: If the form is not filed within the required timeframe, the unused private activity bond volume cap may be forfeited, meaning that the opportunity to carry it forward to the next year is lost.

2. IRS Scrutiny: Incorrect or incomplete filings may trigger IRS reviews or audits, which could result in further penalties.

Key Considerations for Filing Form 8328

1. Careful Tracking of Bond Allocation: States and local governments should carefully track their bond allocation each year and the amount of unused capacity to ensure accurate filing of Form 8328.

2. Timely Filing: Ensure that Form 8328 is filed within the specified deadlines. Missing deadlines could cause the unused bond capacity to be forfeited, affecting future bond issuance plans.

3. Work with Experts: Due to the complexity of private activity bonds and tax law, it’s recommended that state or local governments work with financial professionals or tax experts who are familiar with these issues to ensure proper compliance.

Conclusion

IRS Form 8328 is an essential tool for state and local governments to manage their private activity bond volume cap effectively. By filing the form, governments can carry forward unused bond authority to future years, giving them more flexibility to fund economic development and infrastructure projects.

Filing Form 8328 ensures that unused bond capacity does not go to waste, helping governmental entities better manage resources and maximize opportunities for tax-exempt financing. It is vital for issuers to adhere to the filing requirements and deadlines to ensure that they benefit from this provision.