Form 8038-T Arbitrage Rebate and

(Rev. May 1995) 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

9 Type of issue © Issue price © $

10

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 © From: Month Day Year

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

23 Did you “elect in”? (see instructions)

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

24 Did you make a bond year election?

25

26 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?

27 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?

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. 5-95)

Part I

Part II

©

Cat. No. 11545Y

Room/suite

11

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

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 © $

20 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: Month Day Year

Is this a 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

Yes © No

16 Amount of rebate previously paid with respect to this issue © $

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

34

©

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

23

24

25

26

27

28

29

30

31

32

33

35

34

$

$

For Paperwork Reduction Act Notice, see page 2.
Form 8038-T (Rev. 5-95) 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 January 1, 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 23 and 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 

(a) 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 (b) any income attributable to

the excess described in (a).

For rules on computing the arbitrage

rebate for bonds subject to section

148(f), see the regulations under

sections 148. Regulations sections

1.148-1 through 1.148-11 are generally

effective for bonds issued after

June 30, 1993.

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.

● Use Form 8038-T (a) to pay a penalty

in lieu of rebating arbitrage to the United

States, (b) to pay a penalty to terminate

the election to pay a penalty in lieu of

rebating arbitrage, or (c) to pay a

penalty for failing to pay either penalty

on time.

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

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).

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.

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.

General Instructions

Note: Use a separate Form 8038-T for

each issue.

The time needed to complete and file

this form will vary depending on

individual circumstances. The estimated

average time is:

Recordkeeping 11 hr., 0 min.

Purpose of Form

Learning about the

law or the form 6 hr., 27 min.

Preparing, copying,

assembling, and sending

the form to the IRS 6 hr., 55 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 Internal

Revenue Service, Attention: Tax Forms

Committee, PC:FP, Washington, DC

20224. DO NOT send the form to this

address. Instead, see Where To File on

page 4.

● Use Form 8038-T (a) to pay the

arbitrage rebate to the United States or

(b) to pay a penalty for failing to pay on

time the arbitrage rebate to the United

States.

Section references are to the Internal

Revenue Code of 1986 unless otherwise

noted.

Note: The 1992 regulations ( T.D. 8418,

1992-1 C.B. 29) are specifically

referenced in the instructions. 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 are

effective for bonds issued after June 30,

1993.

Arbitrage Rebate

● Use Form 8038-T to pay yield

reduction payments.

Note: The Revenue Reconciliation Act of

1993 permanently extended the

authority to issue qualified mortgage

bonds.

Regulations section 1.148-11 permits

an issuer to elect to apply retroactively

the new regulations in whole, but not in

part, to outstanding issues issued before

July 1, 1993, that are subject to the

rebate requirement. The 18-month

spending exception to the rebate

requirement cannot be retroactively

applied. The issuer also has the option

to apply various provisions of the former

regulations to bonds issued before

August 15, 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.103A-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. Also,

see line 23 and its instructions as well

as the 1992 and 1993 regulations.

In addition, certain amendments to

Regulations sections 1.148-1 through

1.148-11 and Temporary Regulations

sections 1.148-1T through 1.148-6T and

1.148-9T through 1.148-11T are

generally effective for bonds issued after

June 6, 1994. See Regulations section

1.148-11(i) and Temporary Regulations

section 1.148-11T(i) for special transition

rules for these amendments.

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 are contained

in Regulations section 1.148-1(c) (1992

regulations).

Under the regulations effective after

June 30, 1993.—If the failure is not due

to willful neglect, the failure will be

treated as not having occurred if, in
Form 8038-T (Rev. 5-95) 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 (a) the penalty for failing to pay the

arbitrage rebate on time, (b) the penalty

in lieu of arbitrage rebate, (c) the penalty

to terminate the election to pay a

penalty in lieu of arbitrage rebate, or (d)

the penalty for failing to pay a penalty

on time.

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 recovered.

See Regulations section 1.148-3(i) and

Rev. Proc. 92-83 cited in Recovery of

overpayment below.

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.

Penalty in Lieu of Arbitrage

Rebate

Generally, the “available construction

proceeds” means the amount equal to

the issue price of the construction issue

(a) 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 (b) 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).

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

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

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.

Failure To Pay Timely the Penalty

in Lieu of Arbitrage Rebate or the

Termination Penalty

Failure to pay the proper amount of

penalty 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 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 if (a) 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 (b) 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.

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

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.

addition to payment of the proper

arbitrage rebate amount, the issuer pays

a penalty to the United States. Detailed

rules relating to the penalty are

contained in Regulations section

1.148-3(h).

construction proceeds, and spending

requirements needed to compute the

penalty in lieu of arbitrage rebate.
Form 8038-T (Rev. 5-95) Page 4

Line 9.—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 12.—Enter the date of the most

recently filed (previous) Form 8038-T for

this issue.

Line 13.—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 14.—Attach a check or money

order for this amount made payable to

the Internal Revenue Service.

Line 15.—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 16.—Enter the total of all previous

rebate payments made with respect to

this issue.

Part III—Penalty in Lieu of

Arbitrage Rebate

Line 18.—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, Philadelphia,

PA 19255.

Specific Instructions

Part I—Reporting Authority

Line 1.—Enter the name of the

governmental entity that issued the

bonds, not the name of the entity

receiving the benefit of the financing.

Line 4.—Enter the report number from

Form 8038, Information Return for

Tax-Exempt Private Activity Bond Issues,

or Form 8038-G, Information Return for

Tax-Exempt Governmental Obligations,

on which you reported this issue. If you

reported this issue on Form 8038-GC,

Information Return for Small Tax-Exempt

Governmental Bond Issues, Leases, and

Installment Sales, enter “GC” followed

by the calendar year for which Form

8038-GC was filed (e.g., GC1995).

Note: If you did not file a Form 8038,

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

blank and check the box on line 11.

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.

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

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).

See the instructions for line 22 for

paying a penalty for failure to pay on

time either of the penalties described in

the immediately two preceding

paragraphs.

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 10.—In general, in determining the

yield on an investment to which a yield

reduction payment applies, any amount

paid to the United States in accordance

with Regulations section 1.148-5(c),

including a rebate amount, is treated as

a payment for that investment that

reduces the yield on that investment.

See the instructions for line 17 for

paying a penalty for failing to pay the

arbitrage rebate to the United States on

time.

Line 17.—If the issuer failed to make the

appropriate arbitrage rebate payment

with Form 8038-T, see Failure To Pay

Arbitrage Rebate on Time in the

General Instructions. Compute the

penalty for failure to pay on time. Enter

the total on line 17 and attach a

separate check for that amount.

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.

Penalties

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.
Form 8038-T (Rev. 5-95) Page 5

Line 23.—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 25.—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 24.—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 26.—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 27.—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 28.—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

instruction for lines 34 and 35 on

applying the 1993 regulations

retroactively.

● 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,

Check box B if:

● 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,

● The construction financed by the

construction issue has been

substantially completed before the end

of the initial temporary period,

● 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

● 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 21.—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 22.—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 in the General

Instructions. Compute the penalty for

failure to pay on time and enter the total

on line 22 and attach a separate check

for that amount.

Enter the date on which the issuer

made the election to terminate the 11⁄2%

penalty in lieu of arbitrage rebate.

Line 29.—Regulations section

1.148-4T(h)(2)(ix) 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 1.148-4T(h)(5)(ii)(A),

hedges can be entered into prior to the

issuance of the tax-exempt bonds.

Line 30.—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 31.—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.

Line 19.—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 20.—Check box A if:

● 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,

B. Elections made under the 1993

regulations

A. Elections made under the 1992

regulations

● 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

● 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 17.
Form 8038-T (Rev. 5-95) Page 6

Line 33.—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 34.—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

outstanding issues issued before July 1,

1993, that are subject to the rebate

requirement. The 18-month spending

exception to the rebate requirement

cannot be retroactively applied. The

Printed on recycled paper

Line 35.—Regulations section 1.148-11T

permits issuers to apply certain

amendments to Regulations sections

1.148-1 through 1.148-11 and

Temporary Regulations sections

1.148-1T through 1.148-6T and 1.148-9T

through 1.148-11T before the effective

date.

Line 32.—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.

issuer also has the option to apply

individual provisions of Regulations

sections 1.148-1 through 1.148-11 to

bonds issued before August 15, 1993.

Regulations section 1.148-11 also

contains several specific application

transition rules.