Form 8038-T Arbitrage Rebate and

(Rev. June 1999) Penalty in Lieu of Arbitrage Rebate OMB No. 1545-1219

© Under Sections 143(g)(3) and 148(f)

and Sections 103(c)(6)(D) and 103A(i)(4) of the Internal Revenue Code of 1954 Department of the Treasury

Internal Revenue Service

Reporting Authority

1 Issuer’s name 2 Issuer’s employer identification number

3 Number and street (or P.O. box no. if mail is not delivered to street address) 4 Report number

5 City, town, or post office, state, and ZIP code 6 Date of issue

7 Name of issue 8 CUSIP number

Arbitrage Rebate

Type of issue © Issue price © $

If Form 8038, Form 8038-G, or Form 8038-GC was not filed for this issue, check box ©

$

14

Amount of rebate being paid with this form ©

15

Period to which payment relates ©

$

17

Penalty for failure to pay arbitrage rebate on time (attach statement) ©

Elections by the Issuer (see instructions)

Please check the “Yes” or “No” box for each question. Yes No

Did you elect to treat the last day of the bond year on a variable yield issue as the computation date?

Did you elect to treat a transitioned variable yield issue as a fixed yield issue?

24

Did you elect to apply the rules under section 148 to determine if the bond complies with section 103(c)(6)(D) of the

1954 Code?

25

Did you elect to treat a variable yield bond that is not a tender bond as a fixed yield bond after it converted to a fixed rate?

26

Did you elect to continue treating an issue as a variable yield issue after all the bonds in the issue converted to a fixed rate?

27

Did you elect to recompute the yield on a transitioned fixed yield issue?

Under penalties of perjury, I declare that I have examined this return, and accompanying schedules and statements, and to the best of my knowledge

and belief, they are true, correct, and complete. Please

Sign

Here

Signature of officer Type or print name and title Date

Form 8038-T (Rev. 6-99)

Part I

Part II

©

Cat. No. 11545Y

Room/suite

11

Date of the most recently filed (previous) Form 8038-T for this issue: (Month/Day/Year)

12

Is this the final Form 8038-T for this issue? ©

Part III Penalty in Lieu of Arbitrage Rebate

18

Check the appropriate box ©

© Check box if this Part applies

Part IV

If “Other,” give the number of months since date of issue ©

19

Available construction proceeds © $ Unspent © $

If you elected to terminate the election to pay penalty in lieu of arbitrage rebate,

check one of the following (see instructions): © A B Date election was terminated © 

21

Penalty in lieu of rebate © $ or upon termination © $ Total ©

22

Penalty for failure to pay on time (attach statement) ©

© Check box if this Part applies

To:

Amount of yield reduction payment (see instructions) ©

13

28

29

30

31

32

33 Did you identify a hedge?

Did you elect to use an actual facts analysis?

Did you elect to exclude earnings on a reasonably required reserve or replacement fund from the definition of available

construction proceeds?

Did you elect to treat the different purposes of a multipurpose issue as separate issues for purposes of the 2-year exception?

Did you elect to treat each loan of a pooled financing issue as a separate issue for purposes of applying the spending exception?

6 months 12 months 18 months 24 months Other

A. Elections made under the 1992 regulations

B. Elections made under the 1993 regulations

Yes © No

Interest on underpayment of arbitrage rebate (see instructions) © $

35

Did you apply certain provisions of section 1.148-11A(i) before the effective date?

34

©

Did you apply certain provisions of section 1.148-11(b) before the effective date?

28

27

29

30

31

32

33

34

35

36

37

39

38

$

$

For Paperwork Reduction Act Notice, see page 6.

Check box if Amended Return ©

9 Name and title of officer or legal representative whom the IRS may call for more information 10 Telephone number of officer or legal representative

( )

$

$

16

Amount of rebate previously paid with respect to this issue ©

20

Interest on underpayment of penalty in lieu of rebate or upon termination (see instructions) © $

23

36

37

38

39

/ /

From: (Month/Day/Year) / / (Month/Day/Year) / /
Form 8038-T (Rev. 6-99) Page 2

Qualified mortgage bonds and

qualified veterans’ mortgage bonds.

Section 143(g)(3) and section 103A(i)(4)

of the 1954 Code provide the arbitrage

rebate rules for qualified mortgage

bonds and qualified veterans’ mortgage

bonds issued after August 15, 1986.

Under these special rules, issuers may

pay the rebate either to mortgagors, or if

an election is made before issuance of

the bond, to the United States. Use this

form only if you have elected to pay the

rebate to the United States.

Industrial development bonds.

Obligations that are part of an issue of

industrial development bonds issued

before 1986 (other than housing

obligations described in section

103(b)(4)(A) of the 1954 Code or section

11(b) of the Housing Act of 1937) are

subject to the rebate requirements of

section 103(c)(6)(D) of the 1954 Code.

However, see line 27 and the related

instructions.

Further, the rebate requirement

generally does not apply to bond

proceeds that are invested in certain

tax-exempt bonds, certain tax-exempt

mutual funds, or certain demand deposit

securities purchased directly from the

United States Treasury.

Computation of arbitrage rebate. The

amount of the rebatable arbitrage is:

Under section 148(f), interest on a

state or local bond is not tax exempt

unless the issuer of the bond rebates to

the United States arbitrage profits

earned from investing proceeds of the

bond in higher yielding nonpurpose

investments.

● A penalty:

Exceptions. There is no rebate

requirement under section 148(f) if the

exception for temporary investments

under section 148(f)(4)(B) applies or the

exception for governmental units issuing

$5 million or less of bonds under section

148(f)(4)(D) applies.

Also, the rebate requirement does not

apply to “available construction

proceeds” of a construction issue if

The arbitrage rebate exception for a

construction issue only applies to

“available construction proceeds.” Other

proceeds of a construction issue do not

qualify for this exception.

General Instructions

Note: Use a separate Form 8038-T for

each issue.

Purpose of Form

Section references are to the Internal

Revenue Code of 1986 unless otherwise

noted.

Note: For the 1992 regulations, see T.D.

8418, 1992-1 C.B. 29. For the 1993

regulations, see T.D. 8476, 1993-2 C.B.

13 and T.D. 8538, 1994-1 C.B. 26. In

general, the 1993 regulations apply to

bonds sold after July 7, 1997.

Arbitrage Rebate

Use Form 8038-T to pay:

Failure To Pay Arbitrage Rebate

on Time

Failure to pay the proper amount of

arbitrage rebate on time may cause the

bond to be treated as not being, and as

never having been, tax exempt.

Under the regulations effective prior

to July 1, 1993. Generally, if the failure

is an innocent failure, the failure will be

treated as not having occurred if the

issuer pays a correction amount to the

United States. Detailed rules relating to

innocent failures, the correction amount

and the time to pay the correction

amount are contained in Regulations

section 1.148-1(c) (1992 regulations).

Even if the failure is not innocent or

not so treated, the failure will be treated

as not having occurred if the failure is

not due to willful neglect and the issuer

pays a correction amount and a penalty

to the United States. Detailed rules

relating to willful neglect, the correction

amount, and the penalty and interest are

contained in Regulations section

1.148-1(c) (1992 regulations).

Under the regulations effective after

July 7, 1997. If the failure is not due to

willful neglect, the failure will be treated

as not having occurred if, in addition to

payment of the proper arbitrage rebate

amount, the issuer pays a penalty and

interest to the United States. Detailed

rules relating to the penalty and interest

are contained in Regulations section

1.148-3(h).

Penalty in Lieu of Arbitrage

Rebate

In the case of a construction issue, an

exception from the rebate requirement is

provided under section 148(f)(4)(C) for

the available construction proceeds of

the issue if certain spending

requirements are met. Since this

exception only applies to available

construction proceeds, other proceeds

Note: The exception under section

148(f)(4)( D) is modified by section 223 of

the Taxpayer Relief Act of 1997. After

1997, a governmental issuer may issue

up to $10 million in bonds per calendar

year (aggregate face amount of bonds

other than private activity bonds), if no

more than $5 million is used to finance

expenditures other than public school

capital expenditures.

● The arbitrage rebate to the United

States, or

● A penalty for failing to pay on time the

arbitrage rebate to the United States, or

1. In lieu of rebating arbitrage to the

United States,

2. To terminate the election to pay a

penalty in lieu of rebating arbitrage, or

3. For failing to pay either penalty on

time.

1. The excess of the amount earned

on all nonpurpose investments over the

amount which would have been earned

if the nonpurpose investments were

invested at a rate equal to the bond

yield, plus

2. Any income attributable to the

excess described in 1.

For rules on computing the arbitrage

rebate for bonds subject to section

148(f), see the regulations under section

148. The 1993 regulations, as amended,

are generally effective for bonds sold

after July 7, 1997. Generally, an issuer

may apply these regulations to bonds

that are outstanding on July 8, 1997,

and to which certain prior regulations

apply. Moreover, the 1997 amendments

to the 1993 regulations, redesignating

the temporary rules as sections

1.148-1A through 1.148-6A and

1.148-9A through 1.148-11A, together

with the applicable provisions of the

original 1993 regulations, continue to

apply to bonds issued before July 8,

1997. The 18-month spending exception

to the rebate requirement cannot be

applied to any bond sold before July 1,

1993.

For rules on computing the arbitrage

rebate for bonds subject to section

143(g)(3) or section 103A(i)(4) of the

1954 Code, see Temporary Regulations

section 6a.103-2(i)(4). For rules on

computing the arbitrage rebate for

bonds subject to section 103(c)(6)(D) of

the 1954 Code, see Temporary

Regulations section 1.103-15AT, T.D.

8005, 1985-1 C.B. 39, if the issuer has

not applied the later regulations. Also,

see line 27 and its instructions as well

as the 1992 and 1993 regulations.

certain spending requirements are met;

or if those spending requirements are

not met, an election is made to pay a

penalty in lieu of arbitrage rebate. See

section 148(f)(4)(C).

● Yield reduction payments,
Form 8038-T (Rev. 6-99) Page 3

Who Must File

Arbitrage Rebate

Issuers of tax-exempt bonds must file

Form 8038-T to pay the arbitrage rebate

to the United States under section

143(g)(3), section 148(f), or the

corresponding provisions of the 1954

Code. Payments may be made by a

person acting for the issuer for bonds

subject to section 103(c)(6)(D) of the

1954 Code.

Penalties

Issuers must also use Form 8038-T to

pay the penalty:

When To File

Arbitrage Rebate

File Form 8038-T when paying the

arbitrage rebate to the United States.

Under section 148(f), the installments are

due 60 days after the end of every 5th

bond year during the term of the issue.

The final installment is due 60 days after

the date the last bond of the issue is

discharged.

Special rules. For a tax and revenue

anticipation bond, you need not make

the last installment of arbitrage rebate

until at least 8 months after the bond

issue date. See also section 143(g)(3)

and section 103A(i)(4) of the 1954 Code

for rules concerning qualified mortgage

bonds and qualified veterans’ mortgage

bonds. See Temporary Regulations

section 1.103-15AT(e) (1992 regulations)

for rules concerning industrial

development bonds.

Yield Reduction Payments

Issuers of tax-exempt bonds must file

Form 8038-T to pay any yield reduction

payments in accordance with

Regulations section 1.148-5(c).

Yield Reduction Payments

File Form 8038-T when paying yield

reduction payments to the United States

in accordance with Regulations section

1.148-5(c). In general, an amount is paid

under Regulations section 1.148-5(c) if it

is paid to the United States at the same

time and in the same manner as rebate

amounts are required to be paid. A yield

reduction overpayment may also be

Under Regulations section 1.148-1(b)

(1992 regulations), each installment must

be in an amount that equals at least 90

percent of the rebatable arbitrage as of

the computation date (i.e., the end of

the 5-year period). In addition, under

Regulations section 1.148-1(b) (1992

regulations), the final installment must

include all of the rebatable arbitrage as

of the last computation date, plus any

income attributable to the rebatable

arbitrage.

Under Regulations section 1.148-3(f),

each installment must be in an amount

that, when added to the future value as

of the computation date (i.e., the end of

the 5-year period) of previous rebate

payments made for the issue, equals at

least 90 percent of the rebatable

arbitrage as of the computation date. In

addition, under Regulations section

1.148-3(f), the final installment must

include an amount that, when added to

the future value of previous rebate

payments made for the issue, equals

100 percent of the rebate amount as of

that date. See Regulations sections

1.148-3(f)(3) and 1.148-3(c) for detailed

rules determining future value for these

purposes.

Generally, the “available construction

proceeds” means the amount equal to

the issue price of the construction issue:

The penalty in lieu of arbitrage rebate

is equal to 11⁄2% of the amount of the

available construction proceeds that do

not meet certain spending requirements.

See section 148(f)(4)(C) and Regulations

section 1.148-7 for the rules for

construction proceeds, available

construction proceeds, and spending

requirements needed to compute the

penalty in lieu of arbitrage rebate.

Penalty for the Termination of

Election To Pay a Penalty in Lieu

of Arbitrage Rebate

You may terminate the election to pay a

penalty in lieu of arbitrage rebate by

paying a 3% penalty. Generally, compute

the penalty for the termination election

under section 148(f)(4)(C)(viii) with

reference to the end of the initial

temporary period. See section 148(c)

and Regulations section 1.148-2(e) for

Failure To Pay Timely the Penalty

in Lieu of Arbitrage Rebate or the

Termination Penalty

Failure to pay the proper amount of

penalty and interest on time (after an

appropriate election either to pay

penalty in lieu of arbitrage rebate or to

pay a termination penalty) may cause

the bond (or any refunding bond with

respect thereto) to be treated as not

being, and as never having been, tax

exempt. In general, the rules discussed

in Failure To Pay Arbitrage Rebate on

Time, on page 2, also apply to these

penalties. See Regulations section

1.148-6(n) (1992 regulations) and

1.148-3(h) (1993 regulations).

A “construction issue” is an issue of

tax-exempt bonds that meets both of

the following conditions:

Under section 148(f)(4)(C), the payment

of a penalty in lieu of arbitrage rebate

must be made no later than 90 days

after the end of each 6-month period

relating to the penalty.

Payment of the 3% penalty to

terminate the penalty in lieu of arbitrage

rebate must be made to the United

States no later than 90 days after (a) the

end of the initial temporary period if the

termination election was made under

Penalties

of a construction issue do not qualify for

this exception. Thus, rebatable arbitrage

may be owed for proceeds other than

available construction proceeds even if

this exception is satisfied for the

available construction proceeds. The

issuer may have elected to pay a

penalty in lieu of rebating arbitrage for

the available construction proceeds if

the spending requirements of section

148(f)(4)(C) are not satisfied. The penalty,

if any, is payable for each applicable

6-month period after the date the bonds

are issued. Detailed rules concerning

these provisions are contained in

Regulations section 1.148-7.

1. At least 75% of the available

construction proceeds of such issue are

to be used for construction expenditures

for property to be owned by a

governmental unit or a 501(c)(3)

organization, and

2. All bonds that are part of such

issue are qualified 501(c)(3) bonds,

bonds that are not private activity

bonds, or private activity bonds issued

to finance property to be owned by a

governmental unit or a 501(c)(3)

organization.

1. Increased by earnings on the issue

price, earnings on amounts in any

reasonably required reserve or

replacement fund not funded from the

issue, and earnings on all of the

foregoing earnings, and

2. Reduced by the amount of the

issue price in any reasonably required

reserve or replacement fund and the

issuance costs financed by the issue.

See section 148(f)(4)(C)(vi).

1. For failing to pay the arbitrage

rebate on time,

2. In lieu of arbitrage rebate,

3. To terminate the election to pay a

penalty in lieu of arbitrage rebate, or

4. For failing to pay a penalty on time.

definitions of a temporary period.

Compute the amount of the penalty for

the termination election under section

148(f)(4)(C)(ix) with reference to the date

of the election. See section

148(f)(4)(C)(viii) and (ix) for the rules for

terminating an election to pay a penalty

in lieu of rebate.

recovered. See Regulations section

1.148-3(i) and Rev. Proc. 92-83 cited in

Recovery of Overpayment on page 4.
Form 8038-T (Rev. 6-99) Page 4

Line 11. Enter the type of issue as was

checked for this issue on Form 8038 or

Form 8038-G. For bonds previously

reported on Form 8038-GC, enter “Small

Governmental Bond.” Also enter the

total issue price that was listed on Form

8038, 8038-G, or 8038-GC filed for this

issue.

Line 14. Enter the date of the most

recently filed (previous) Form 8038-T for

this issue.

Line 15. In case of a rebate of arbitrage,

check the box marked “Yes” only if the

issue has been discharged (redeemed,

called, etc.). In the case of the payment

of a penalty in lieu of arbitrage rebate,

check the box marked “Yes” only if the

spending provisions of section

148(f)(4)(C) have been fully complied

with or if a termination penalty payment

is made with this form. In all other

cases, check the box marked “No.”

Parts II and III—In General

Complete Part II, Arbitrage Rebate, if

you are paying arbitrage rebate, and

complete Part III if you are paying a

penalty in lieu of arbitrage rebate. Under

limited circumstances, you may be

rebating arbitrage and paying a penalty

in lieu of rebating arbitrage.

Check the box for each part being

completed. If you check the box marked

“Penalty in Lieu of Arbitrage Rebate,”

you are stating that the issuer timely

made an election under section

148(f)(4)(C)(vii). See also section

148(f)(4)(C)(xv).

Part II—Arbitrage Rebate

Line 16. Attach a check or money order

for this amount made payable to the

“United States Treasury.”

Line 17. Enter the period of time relating

to this rebate payment. For any

installment other than the final

installment, the period of time should

reflect the bond years selected.

Line 18. Enter the total of all previous

rebate payments made with respect to

this issue.

Part III—Penalty in Lieu of

Arbitrage Rebate

Line 21. The expenditure requirements

for available construction proceeds

change at the end of each 6-month

period following the date the bonds are

issued. Check the appropriate box for

the number of months between the date

that the bonds were issued and the end

of the reporting period for which this

Form 8038-T is being filed. If the period

is over 24 months (2 years), or is other

than that given for the labeled boxes,

check the box marked “Other” and give

the number of months since the date of

issue.

Where To File

File Form 8038-T with the Internal

Revenue Service Center, Ogden, UT

84201.

Specific Instructions

Part I—Reporting Authority

Line 1. Enter the name of the

governmental entity that issued the

Line 4. Enter the report number from

Form 8038, Information Return for

Tax-Exempt Private Activity Bond Issues,

Form 8038-G, Information Return for

Tax-Exempt Governmental Obligations,

or Form 8038-GC, Information Return

for Small Tax-Exempt Governmental

Bond Issues, Leases and Installment

Sales, on which you first reported this

issue.

Note: If you did not file a Form 8038,

8038-G, or 8038-GC, leave this line

blank and check the box on line 13.

Line 6. Enter the date of issue. This is

generally the first date on which there is

a physical exchange of the bonds for

the purchase price.

Line 7. Enter the name of the issue. If

there is no name, please provide other

identification of the issue.

Line 8. Enter the CUSIP (Committee on

Uniform Securities Identification

Procedures) number of the bond with

the latest maturity. If the issue does not

have a CUSIP number, enter “None.”

Signature

Form 8038-T must be signed by an

authorized representative of the issuer.

Also type or print the name and title of

the person signing Form 8038-T.

Recovery of Overpayment

An overpayment may be recovered

only to the extent that a recovery on the

date that it is first requested would not

result in an additional rebate amount if

that date were treated as a computation

date.

Except for overpayments of penalty in

lieu of rebate under section

148(f)(4)(C)(vii) and Regulations section

1.148-7(k), an overpayment of less than

$5,000 may not be recovered before the

final computation date. See Regulations

section 1.148-3(i). The format and

procedure for requesting recovery of

amounts paid under rebate provisions is

provided in Section 4, Rev. Proc. 92-83,

1992-2 C.B. 487.

Line 12. If a yield reduction payment is

made to the United States in

accordance with Regulations section

1.148-5(c), in general, to determine the

yield on an investment to which the

payment applies, any amount paid,

including a rebate amount, is treated as

a payment for that investment that

reduces its yield.

Line 19. If the issuer failed to make the

appropriate arbitrage rebate payment

with Form 8038-T, see Failure To Pay

Arbitrage Rebate on Time on page 2.

Compute the penalty for failure to pay

on time and enter the total on line 19.

In addition, whichever is applicable,

attach a statement to this Form 8038-T

explaining why there was (1) an innocent

failure or (2) no willful neglect in the

issuer’s failure to pay the arbitrage

rebate due. Submit the statement

relating to an innocent failure according

to the format and procedure of Section

4, Rev. Proc. 90-11, 1990-1 C.B. 469.

Submit the statement relating to why

there was no willful neglect according to

the format and procedure of Section 3,

Rev. Proc. 88-10, 1988-1 C.B. 635.

In general, an issuer may recover an

overpayment of rebate for an issue of

tax-exempt bonds by establishing to the

Internal Revenue Service that the

overpayment occurred. An overpayment

is the excess of the amount paid to the

United States for an issue under section

148 over the sum of the rebate amount

for the issue as of the most recent

computation date and all amounts that

are otherwise required to be paid under

section 148 as of the date the recovery

is requested.

See the instructions for line 19 for

paying a penalty for failing to pay the

arbitrage rebate to the United States on

time.

Amended Return. If you are filing an

amended Form 8038-T, check the

amended return box. Complete Part I

and only those parts of Form 8038-T

you are amending. Use the same report

number (line 4) that was used in the

original report.

Line 20. If the issuer failed to make the

appropriate rebate payment with Form

8038-T, see Failure To Pay Arbitrage

Rebate on Time on page 2. Compute

the interest on the underpayment of

arbitrage rebate and enter the total on

line 20.

Note: File a separate return for each

different time period associated with a

checked box.

See the instructions for line 25 for

paying a penalty for failure to pay on

time either of the penalties described in

the immediately two preceding

paragraphs.

section 148(f)(4)(C)(viii), or (b) the date of

the termination election if it was made

under section 148(f)(4)(C)(ix).

bonds, not the name of the entity

receiving the benefit of the financing.
Form 8038-T (Rev. 6-99) Page 5

Line 27. This election applies to a bond

to which section 103(c)(6)(D) of the 1954

Code applies. You may elect to apply

the rules under the regulations for

section 148 to determine if the bond

complies with section 103(c)(6)(D) of the

1954 Code.

Line 29. You may elect to treat any

variable yield issue sold on or before

May 15, 1989, and issued on or before

June 14, 1989, as a fixed yield issue. If

you make this election, the yield on the

issue is computed over the term of the

issue rather than period-by-period. See

Regulations section 1.148-3(b)(1)(ii).

Line 28. You may elect to treat the last

day of any bond year on a variable yield

issue as a computation date. If you

make this election, the yield on the issue

may be computed for periods shorter

than 5 years. This election is revocable

under certain conditions. See

Regulations section 1.148-3(b)(2)(ii)(B).

Line 30. If you make this election, a

variable yield bond that is not a tender

bond is treated as a fixed yield bond

after the close of business on the first

day the bond would be a fixed yield

bond if issued immediately after the

close of business on that day. See

Regulations section 1.148-3(b)(3)(i).

Line 31. If you make this election, a

variable yield issue that has been

converted to a fixed yield issue will

continue to be treated as a variable yield

issue. See Regulations section

1.148-3(b)(3)(ii).

Line 32. You may elect to recompute the

yield on certain fixed yield issues sold

on or before May 15, 1989, and issued

on or before June 14, 1989. Otherwise,

you must use the yield computed as of

the issue date for such purposes. See

Regulations section 1.148-3(c)(5).

Part IV—Elections by the Issuer

This part applies only if the bonds are

subject to the requirements of the

regulations under section 148.

For rules relating to elections, see

Regulations section 1.148-8(h) (1992

regulations) and 1.148-1(d). See the

instructions for lines 38 and 39 on

applying the 1993 regulations

retroactively.

Check box B if:

1. The election to terminate the 11⁄2%

penalty in lieu of arbitrage rebate was

made before the end of the initial

temporary period, and not later than 90

days after the date the construction was

substantially completed,

2. The construction financed by the

construction issue has been

substantially completed before the end

of the initial temporary period,

3. The issuer has identified on its

records an amount of available

construction proceeds that will not be

spent for the governmental purposes of

the issue, and

4. The issuer pays with this Form

8038-T an amount equal to 3% of the

available construction proceeds of the

issue that have not been spent for the

governmental purpose of the issue as of

the close of the temporary period

(shortened as if the temporary period

ended as of the date the election was

made), multiplied by the number of

years (including fractions thereof) in the

initial temporary period.

Line 24. Indicate the amount of penalty

being paid. If the payment is for a

penalty in lieu of arbitrage rebate or if

the payment is for a termination penalty,

enter the dollar amount. If the payment

represents payments for both, enter the

total of the penalty payments.

Line 25. If the issuer failed to make the

appropriate penalty payment with Form

8038-T, see Failure To Pay Timely the

Penalty in Lieu of Arbitrage Rebate or

the Termination Penalty on page 3.

Compute the penalty for failure to pay

on time and enter the total on line 25.

Enter the date on which the issuer

made the election to terminate the 11⁄2%

penalty in lieu of arbitrage rebate.

Line 33. Regulations section

1.148-4(h)(2)(viii) permits an issuer of

tax-exempt bonds to identify a hedge for

the hedge to be included in yield

calculations that are necessary to

compute arbitrage profits. Under

Regulations section 1.148-4(h)(5),

hedges can be entered into prior to the

issuance of the tax-exempt bonds.

Line 34. Regulations section

1.148-7(f)(2) permits an issuer to use an

“actual facts” analysis for a construction

issue under Regulations sections

1.148-7(e) through (m) rather than an

analysis based on reasonable

expectations. This election does not

apply for purposes of determining

whether an issue is a construction issue

under Regulations section 1.148-7(f)(1) if

the election for the 11⁄2% penalty in lieu

of arbitrage rebate is made under

Regulations section 1.148-7.

Line 35. Regulations section 1.148-7(i)(2)

permits an issuer to elect to exclude

earnings on a reasonably required

reserve or replacement fund from the

definition of available construction

proceeds. Earnings on any reasonably

required reserve or replacement fund are

available construction proceeds only to

the extent that those earnings accrue

before the earlier of the date

construction is substantially completed

or the date that is 2 years after the issue

date. If the election is made, the rebate

requirement applies to the excluded

amounts from the issue date.

B. Elections made under the 1993

regulations

A. Elections made under the 1992

regulations

4. The amount of the available

construction proceeds of the issue that

is not spent for the governmental

purposes of the issue as of the earliest

date on which bonds may be redeemed

is used to redeem bonds on that date.

In addition, whichever is applicable,

attach a statement to this Form 8038-T

explaining why there was (1) an innocent

failure or (2) no willful neglect in the

issuer’s failure to pay the penalty due.

Submit the statement relating to an

innocent failure according to the format

and procedure of Section 4, Rev. Proc.

90-11. Submit the statement relating to

why there was no willful neglect

according to the format and procedure

of Section 3, Rev. Proc. 88-10. Both of

these Rev. Procs. are fully cited in the

instructions for line 19.

3. The amount of the available

construction proceeds of the issue that

is not spent for the governmental

purpose of the issue as of the close of

the initial temporary period is invested at

a yield not exceeding the yield on the

issue or which is invested in any taxexempt bond which is not investment

property, and

2. The issuer pays with this Form

8038-T an amount equal to 3% of the

available construction proceeds of the

issue that have not been spent for the

governmental purpose of the issue as of

the close of the initial temporary period

multiplied by the number of years

(including fractions thereof) in the initial

temporary period,

Line 22. Indicate the available

construction proceeds and the unspent

available construction proceeds as of

the end of the 6-month period for which

this Form 8038-T is filed.

Line 23. Check box A if:

1. The election to terminate the 11⁄2%

penalty in lieu of arbitrage rebate was

made not later than 90 days after the

earlier of the end of the initial temporary

period or the date the construction is

substantially completed,

Line 26. If the issuer failed to make the

appropriate penalty payment with Form

8038-T, see Failure To Pay Timely the

Penalty in Lieu of Arbitrage Rebate or

the Termination Penalty on page 3.

Compute the interest on the

underpayment of the penalty in lieu of

arbitrage rebate, or penalty upon

termination, and enter the total on

line 26.
Form 8038-T (Rev. 6-99) Page 6

Line 39. Regulations section 1.148-11

permits issuers to apply certain

amendments to Regulations sections

1.148-1 through 1.148-11 and

Regulations sections 1.148-1A through

1.148-6A and 1.148-9A through

1.148-11A before the effective date of

the 1993 regulations.

Paperwork Reduction Act Notice

We ask for the information on this form

to carry out the Internal Revenue laws of

the United States. You are required to

give us the information. We need it to

ensure that you are complying with

these laws and to allow us to collect the

right amount of arbitrage rebate, yield

reduction payments, and penalties.

The time needed to complete and file

this form will vary depending on

individual circumstances. The estimated

average time is:

Recordkeeping 12 hr., 12 min.

Learning about the

law or the form 6 hr., 34 min.

Preparing, copying,

assembling, and sending

the form to the IRS 7 hr., 2 min.

If you have comments concerning the

accuracy of these time estimates or

suggestions for making this form

simpler, we would be happy to hear from

you. You can write to the Tax Forms

Committee, Western Area Distribution

Center, Rancho Cordova, CA

95743-0001. DO NOT send the form to

this address. Instead, see Where To File

on page 4.

You are not required to provide the

information requested on a form that is

subject to the Paperwork Reduction Act

unless the form displays a valid OMB

control number. Books or records

relating to a form or its instructions must

be retained as long as their contents

may become material in the

administration of any Internal Revenue

law. Generally, tax returns and return

information are confidential, as required

by section 6103.

Line 37. Regulations section

1.148-7(b)(6) permits an issuer of a

pooled financing issue to apply the

spending exceptions separately to each

conduit loan. Detailed rules relating to

this election are contained in

Regulations section 1.148-7(b)(6).

Line 38. Regulations section 1.148-11(b)

permits issuers to apply certain

provisions of the regulation before the

effective date. Regulations section

1.148-11 permits an issuer retroactively

to apply the 1993 regulations in whole—

but not in part—to issues that were

outstanding before July 8, 1997, and

that are subject to section 148(f) or

sections 103(c)(6) or 103A(i) of the

Internal Revenue Code of 1954. 

The issuer also has the option to apply

individual provisions of Regulations

sections 1.148-1 through 1.148-11 to

bonds issued before July 1, 1993. The

18-month spending exception to the

rebate requirement cannot be

retroactively applied before July 1, 1993.

Regulations section 1.148-11 also

contains several specific application

transition rules.

Line 36. Regulations section 1.148-7(j)

permits an issuer to elect to treat the

different purposes of a multipurpose

issue as two, and only two, separate

issues for purposes of the 2-year

exception if certain conditions are

present. See Regulations section

1.148-7(j)(1) for the rules describing the

conditions that must be present.

Thus, if a bond was issued after July

7, 1997, check the “No” box. If a bond

was issued before July 8, 1997, and the

issuer has electively applied the finalized

1993 regulations, check the “Yes” box.

All other filers should check the “No”

box.

Thus, check the “No” box unless:

1. A bond was issued before June 6,

1994, and before July 8, 1997, the

issuer electively applied the above

regulations (for example, on a previously

filed Form 8038-T), and

2. The issuer intends to continue with

that elective application while filing this

Form 8038-T.