FY 2023 Effect of Sequestration on State & Local Government Filers of Form 8038-CP


Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, refund payments issued to and refund offset transactions for certain state and local government filers claiming refundable credits under section 6431 of the Internal Revenue Code applicable to certain qualified bonds are subject to sequestration.

This means that refund payments and refund offset transactions processed on or after October 1, 2020, and on or before September 30, 2030, will be reduced by 5.7 percent sequestration rate, irrespective of when the IRS received the Form 8038-CPPDF with amounts claimed by an issuer. The sequestration reduction rate will be applied unless and until a law is enacted that cancels or otherwise affects the sequester, at which time the sequestration reduction rate is subject to change.

These reductions apply to Build America Bonds, Qualified School Construction Bonds, Qualified Zone Academy Bonds, New Clean Renewable Energy Bonds, and Qualified Energy Conservation Bonds for which the issuer elected to receive a direct credit subsidy pursuant to section 6431. Issuers should complete Form 8038-CP in the manner provided by the Form 8038-CP instructionsPDF, and affected issuers will be notified through correspondence that a portion of their requested payment was sequestered. Issuers should use this correspondence to identify the portion(s) of amounts requested that were sequestered.

Issuers with any questions about the status of refunds claimed on Form 8038-CP, including any sequester reduction, should contact Customer Account Services at 877-829-5500.

Yearly Sequestration Rate Reduction

Fiscal Year (October 1 thru September 30) Sequestration Rate Reduction
2021-2030 5.7%
2020 5.9%
2019 6.2%
2018 6.6%
2017 6.9%
2016 6.8%
2015 7.3%
2014 7.2%
2013 8.7%