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Part 4. Examining Process

Chapter 81. Tax Exempt Bonds (TEB) Examination Program and Procedures

Section 12. Compliance Review of Form 8038-CP

4.81.12 Compliance Review of Form 8038-CP

Manual Transmittal

June 12, 2026

Purpose

(1) This transmits revised IRM 4.81.12, Compliance Review of Form 8038-CP.

Material Changes

(1) IRM 4.81.12.1(1) - Revised the Purpose and removed the Field Assistance Support Team (FAST).

(2) IRM 4.81.12.1(2) - Updated the Audience from FAST to BSP SPP&O.

(3) IRM 4.81.12.1(3) - Updated the Policy Owner from CP&C to TE/GE, BSP.

(4) IRM 4.81.12.1(4) - Updated the Program Owner from CP&C to BSP SPP&O.

(5) IRM 4.81.12.1(5) - Added Primary Stakeholders Tax Exempt Bonds (TEB).

(6) IRM 4.81.12.1.1(3) - Updated W&I to Taxpayer Services (TS).

(7) IRM 4.81.12.1.1 (3)a - Updated CP&C to BSP SPP&O.

(8) IRM 4.81.12.1.2 - Updated Authority for Direct Pay Bonds.

(9) IRM 4.81.12.1.2(1)Table - Added Table Title.

(10) IRM 4.81.12.1.3 - Updated Roles and Responsibilities title and entire subsection to new ownership of review of Form 8038-CP and TEB Responsibilities.

(11) IRM 4.81.12.1.4 - Added Program Management and Review.

(12) IRM 4.81.12.1.5 - Added Program Controls.

(13) IRM 4.81.12.1.6 - Updated Terms and Acronyms.

(14) IRM 4.81.12.1.7 - Added Related Resources.

(15) IRM 4.81.12.2 - Added Form 8038-CP BBTS Report.

(16) IRM 4.81.12.2.1 - Added Form 8038-CP BBTS Batch Release.

(17) IRM 4.81.12.2.2 - Added Batch Deletion Request.

(18) IRM 4.81.12.3 - Added Form 8038-CP Paper.

(19) IRM 4.81.12.3.1 - Added Form 3210 Acknowledgement Copy.

(20) IRM 4.81.12.4 - Added Form 8038-CP MeF.

(21) IRM 4.81.12.5 - Added Document Perfection.

(22) IRM 4.81.12.5.1 - Added Paper Return Edits.

(23) IRM 4.81.12.5.2 - Added Form 8038-CP MeF and Paper DPB Database Input.

(24) IRM 4.81.12.5.3 - Added Form 8038-CP Discrepancy Procedures.

(25) IRM 4.81.12.5.4 - Add Form 8038-CP Early-Filed.

(26) IRM 4.81.12.5.5 - Added Undeliverable Early-Filed for Form 8038-CP.

(27) IRM 4.81.12.5.6 - Added Reduction of Amount of Credit Payment (Line 22).

(28) IRM 4.81.12.6 - Added Referrals to TEB.

(29) IRM 4.81.12.7 - Added Possible Duplicate Procedures.

(30) IRM 4.81.12.7.1 - Added True Duplicate Procedures.

(31) IRM 4.81.12.8 - Added Amended Return.

(32) IRM 4.81.12.9 - Added RCCMS Input.

(33) IRM 4.81.12.10 - Added Form 8038-CP Statute of Limitations (SOL).

(34) IRM 4.81.12.11 - Added Fraudulent Returns.

(35) IRM 4.81.12.12 - Added Frivolous Returns.

(36) IRM 4.81.12.13 - Added Disallowed Returns.

(37) Exhibit 4.81.12-1 - Added Computer Condition Codes.

(38) Various formatting, grammatical and editorial, dates, and link changes made throughout the IRM.

Effect on Other Documents

This supersedes IRM 4.81.12 dated November 20, 2025.

Audience

Tax Exempt and Government Entities
Exempt Organizations and Government Entities, Tax Exempt Bonds
Shared Services, Business Systems Planning

Effective Date

(06-12-2026)

Virginia E. Puddister
Acting Director, Shared Services
Tax Exempt and Government Entities

4.81.12.1 (06-12-2026)

Program Scope and Objectives

  1. Purpose: This IRM section provides procedures for transcribing and verifying data from Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds. The Ogden Service Center is the central processing center to review the refundable credit payments claimed on Form 8038-CP.

  2. Audience: These procedures apply to employees responsible for Form 8038-CP compliance review.

    • Tax Examiners (TE)

    • BSP SPP&O Analyst

    • BSP SPP&O Manager

  3. Policy Owner: Director, Tax Exempt & Government Entities (TE/GE), Business Systems Planning (BSP).

  4. Program Owner: BSP Submission Processing Programs and Oversight (SPP&O).

  5. Primary Stakeholders: Tax Exempt Bonds (TEB).

4.81.12.1.1 (06-12-2026)

Background

  1. State and local governments, and other qualified issuers of DPBs use Form 8038-CP, to claim:

    • The direct credit payments allowed under the Build America Bonds (BABs) provisions of the American Recovery and Reinvestment Act of 2009 (ARRA).

    • Specified tax credit bonds provisions of the Hiring Incentives to Restore Employment Act (HIRE) of 2010.

  2. This law is codified as IRC 6431. The refundable credits are:

    1. Payable to the issuer of qualified obligations, or at the issuer’s option, to the designated person who pays interest on behalf of the issuer.

    2. Based on a percentage from 35% to 100% of the interest payable under the obligation.

    3. Designed to lower the issuer’s cost of borrowing as a replacement of the federal tax benefit provided to bondholders by traditional tax-exempt bonds under IRC 103.

    4. These qualified obligations are collectively known as Direct Pay Bonds.

    • Build America bonds

    • Recovery zone economic development bonds

    • Specified tax credit bonds

  3. Due to the potential for fraud, TE/GE and Taxpayer Services (TS) operating division, established a compliance review of all Form 8038-CP returns during their initial processing. This review is done in three parts:

    1. BSP SPP&O reviews the return for conformity with TEB records of the direct pay bonds transaction.

    2. TEB reviews BSP SPP&O initial review of Form 8038-CP.

    3. Ogden Submission Processing Center (OSPC) processes the refund return Form 8038-CP.

4.81.12.1.2 (06-12-2026)

Authority

  1. Direct Pay Bonds (DPBs) are obligations that meet applicable requirements for credits allowed under IRC 6431. The table below outlines the authorities for DPBs.

    Note:

    The credit on DPBs is treated as an overpayment of tax and under IRC 6431(b) is to be paid simultaneously with each interest payment date under such bonds to the Issuer of such bonds (or to any person who makes interest payments on behalf of the Issuer). IRC 6431 was repealed by section 13404(b) of the Tax Cuts and Jobs Act of 2017, P.L. 115-97, 131 Stat. 2054, 2138 (2017), effective for bonds issued after December 31, 2017.

    Direct Pay Bonds

    Type of Bond Statute/Authority

    • Build America bonds (BABs)

    • Recovery Zone Economic Development Bonds (RZEDBs)

    		 American Recovery and Reinvestment Act of 2009 (ARRA) introduced Build America Bonds (BABs) and included a special type of BABs eligible for an increased credit amount called recovery zone economic development bonds (RZEDBs). The authority to issue these bonds expired after December 31, 2010.

    • New Clean Renewable Energy Bonds (NCREBs)

    • Qualified Energy Conservations Bonds (QECBs)

    • Qualified Zone Academy Bonds (QZABs) issued under the 2009 and 2010 volume caps

    • Qualified School Construction Bonds (QSCBs)

    		 Hiring Incentives to Restore Employment Act (HIRE) of 2010 extended the refundable tax credit option to four types of previously authorized qualified tax credit bonds, defined as specified tax credit bonds (STCB) in IRC 6431(f). The authority to issue QZABs as STCBs only applied for bonds issued with the national zone academy bond limitation for 2009 and 2010 and carryforward of such allocation. Carryforward must be used within two calendar years. Thus, no direct pay QZABs could be issued after December 31, 2012.
    DPBs and tax credit bonds

    • The Tax Cuts and Jobs Act (P.L. 115-97) repealed the authority to issue tax credit bonds (including the election to receive a refundable credit under former section 6431), including specified tax credit bonds. The repeal applies to qualified forestry conservation bonds, NCREBs, QECBs, QZABs, and QSCBs issued after December 31, 2017. If an issuer takes action that results in a significant modification or reissuance of specified tax credit bonds after the effective date of the Tax Cuts and Jobs Act, then the bonds may no longer be qualified bonds under the applicable section and the issuer may no longer be entitled to request a payment using Form 8038-CP.

    • The authority to issue BABS and RZEDBs expired on January 1, 2011. If an issuer takes action that results in a significant modification or reissuance of BABs or RZEDBs after December 31, 2010, then the bonds may no longer be qualified bonds under the applicable section and the issuer may no longer be entitled to request a payment using Form 8038-CP.

4.81.12.1.3 (06-12-2026)

Roles and Responsibilities

  1. The Director of Shared Services is responsible for the administration, procedures and policies contained in this IRM.

  2. BSP SPP&O is responsible for updating this IRM.

  3. Management officials are responsible for:

    1. Providing internal controls relating to the compliance review of Form 8038-CP.

    2. Ensuring the instructions are communicated to and carried out by the employees completing the compliance review.

  4. BSP SPP&O will be consulted before changes are made to the policies and procedures contained in this IRM.

  5. TEB Specialists are responsible for quality control of the input of Form 8038-CP by completing the following:

    1. Notate comments in the database and make any corrections as needed.

    2. Reviews potential duplicate returns and provides instructions to the analyst.

    3. Provide feedback to analysts for corrections or further research by secure email.

    4. Contacts the taxpayer by phone or byLetter 6436C, Form 8038-CP, Missing or Incomplete Information Request, for missing, illegible, incomplete information, and prior returns not filed.

    5. Close RCCMS established cases.

4.81.12.1.4 (06-12-2026)

Program Management and Review

  1. Program reports include daily reviews for data entry accuracy and TEB in-depth reviews when requested by BSP SPP&O.

4.81.12.1.5 (06-12-2026)

Program Controls

  1. Program controls developed to oversee the program.

    1. Separation of duties between TEB and BSP SPP&O.

    2. BSP SPP&O conducts daily reviews of batches before releasing for processing.

    3. TEB completes the compliance review (prior returns) and interacts with taxpayers as needed. See IRM 4.81.12.1.3, Roles and Responsibilities, for additional information.

4.81.12.1.6 (06-12-2026)

Terms and Acronyms

  1. Acronyms and terms used throughout IRM 4.81.12.

    Acronym Definition
    AM Accounts Management
    BABs Build America Bonds
    BBTS Batch Block Tracking System
    BO Business Objects
    BSP Business Systems Planning
    Cc Carbon Copy
    CC Command Code
    CP&C Compliance Planning & Classification
    CUSIP Committee on Uniform Security Identification Procedures
    DPB Direct Pay Bonds
    DSS Debt Service Schedule
    EO Exempt Organization
    ERS Error Resolution System
    EUP Employee User Portal
    HIRE Hiring Incentives to Restore Employment Act
    IDRS Integrated Data Retrieval System
    IPD Interest Payment Date
    NCREBs New Clean Renewable Energy Bonds
    OSPC Ogden Submission Processing Center
    QECBs Qualified Energy Conservation Bonds
    QSCBs Qualified School Construction Bonds
    QZABs Qualified Zone Academy Bonds
    RCCMS Reporting Compliance Case Management System
    RZEDBs Recovery Zone Economic Development Bonds
    SOL Statute of Limitations
    SPP&O Submission Processing Programs and Oversight
    STCB Specified Tax Credit Bonds
    TEB Tax Exempt Bonds
    TEGE Tax Exempt Government Entities
    TS Taxpayer Services
4.81.12.1.7 (06-12-2026)

Related Resources

  1. In addition to this IRM, the TE may also refer to supplemental resources and to other IRMs.

    • IRM 3.11.26, SC Returns and Documents Analysis, Miscellaneous Tax Exempt Governmental Entities (TE/GE) Tax Returns.

    • IRM 21.7.7, Business Tax Returns and Non-Master File Accounts, Exempt Organizations and Tax Exempt Bonds.

  2. The TAS is an independent organization within the Internal Revenue Service (IRS), led by the National Taxpayer Advocate. Its job is to protect taxpayers’ rights by striving to ensure that every taxpayer is treated fairly and knows and understands their rights under the Taxpayer Bill of Rights (TBOR). TAS offers free help to taxpayers, including when taxpayers face financial difficulties due to an IRS problem, when they are unable to resolve tax problems, when they haven’t been able to resolve on their own, or when they need assistance to address an IRS system, process, or procedure that is not functioning. TAS has at least one taxpayer advocate office located in every state, the District of Columbia, and Puerto Rico.

4.81.12.2 (06-12-2026)

Form 8038-CP BBTS Report

  1. The analyst must submit two BEARS entitlements for Java and BBTS. The BBTS system cannot run without JAVA. BBTS is needed for paper processing only. See IRM 3.10.5, Campus Mail and Work Control, Batch/Block Tracking System and IRM 3.10.5.3, BBTS Coordinator.

    Note:

    BBTS system must be accessed at least once within a 30-day period for account to be active. If not, you will need to resubmit a BEARS entitlements to gain access.

  2. The analyst reviews the Current Inventory Report for Function 300, Program 13210 on the Consolidated Data Depository (CDD) Website for incoming batch(es).

  3. Open CDD

    1. Go to Batch Reports

    2. Select "Multi-Query"

    3. Select "Ogden"

    4. Enter "300" in the Current Function Code

    5. Enter "13210" in the Program Code

    6. Submit Query or click Enter

4.81.12.2.1 (06-12-2026)

Form 8038-CP BBTS Batch Release

  1. For paper processing only. After the batch(es) have been reviewed and approved to be released, open BBTS Batch Block Tracking System (BBTS) and release by doing the following:

    Note:

    BBTS may be accessed through the CDD Web Site by clicking the Consolidated Data Depository (CDD)"Production Web Site" link.

    1. Click on "Navigate."

    2. Select "Batch Release."

    3. Enter "Program Code" 13210 for each batch being released.

    4. Enter each "Batch Number" being released.

      Note:

      You may enter up to 10 batches at time.

    5. Click on "Batch" and "Save" to release batch(es).

    6. Click on Exit and Yes to close BBTS.

      Note:

      Once saved, the batch will be removed from the Multi-Query Batch Report on CDD.

4.81.12.2.2 (06-12-2026)

Batch Deletion Request

  1. For paper processing only. When a batch is received and all returns were pulled from the batch, contact BSP SPP&O Analyst by secure email with the reason for deletion of batch.

  2. BSP SPP&O Analyst will complete a Batch Deletion Request Form and send by secure email to Submission Processing, Planning & Analysis (P&A), OSPC BMF Production monitor.

    Batch Deletion Request Form

    Steps Instructions
    1. Date: Current date.
    2. Requester’s Name.
    3. Phone Number: Requester, Manager or Lead’s.
    4. Program: 13210.
    5. Batch No.
    6. Delete - Other. Check box and enter EIN, Tax Period, Report Number with explanation.
    7. Manager Signature Approval: Send secure email to BSP SPP&O Manager for electronic signature.
    8. Send completed request to SP P&A BBTS Analyst.

4.81.12.3 (06-12-2026)

Form 8038-CP Paper

  1. Form 8038-CP batches are received from Receipt & Control Batching unit. The returns are processed daily and must be completed within 72 hours from the SPP&O received date.

    Form 8038-CP Paper Preparation

    Steps Instructions
    1. Create a folder in the Shared Drive.
    2. Pull paper return(s) that have an amount of over ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ on line 22 of Form 8038-CP, from the batch. Scan and attach to a secure email to BSP SPP&O Analyst and Cc TEB Specialist.
    3. Line 1, Name of entity or line 7, issuer’s name, see IRM 4.81.12.5.3, Discrepancy Procedures, for instructions.
    4. Date stamp each return with the SPP&O Received Date Stamp in the middle of the return without covering pertinent information.

    Note:

    If SPP&O date stamp is unavailable, you may handwrite the date in "Red" , in the middle of the return without covering pertinent information.
    5. Enter returns into the DPB database. See IRM 4.81.12.5.2, DPB Database Input for instructions. If necessary, edit changes to the return in Green (e.g., Report Number, IPD, etc.).
    6. Remove the envelope and scan the returns, then reassemble.
    7. Save scanned returns in created folder.

    Note:

    BSP SPP&O Analyst will need permission to access the Form 8038-CP Shared Drive.
    8. Send secure email to Tax Exempt Bonds (TEB) for review and attach the following:

    1. Scanned PDFs

    2. Form 3210
    9. When TEB releases the batch, release batch(es) on BBTS. See IRM 4.81.12.2.1, Form 8038-CP BBTS Batch Release.

    1. Print two copies of the Form 3210. Assemble the returns in order of how they display on the Form 3210.

    2. In the gusset, insert the following in this order.

      • Form 12230, Expedite Processing Million Dollar Manual Refund

      • Form 9328-BBTS, Batch Transmittal

      • Form 3210 (two copies)

      • Returns in order of Form 3210

    3. Place Control Number 0069 (Rev 05/16/2016) on the outside of each gusset and secure with a rubber band. Place on the outgoing cart for shipping.
    10. Any returns referred to TEB, must be Established and Assigned on RCCMS. See IRM 4.81.12.9, RCCMS Input, for instructions.

4.81.12.3.1 (06-12-2026)

Form 3210 Acknowledgement Copy

  1. When C&E returns the Form 3210 Acknowledgement copy, do the following:

    1. Scan and save the Form 3210 to the batch folder on the Shared Drive.

    2. Rename the batch folder to include Signed Form 3210.

    3. Dispose Form 3210 in Classified Waste bin.

4.81.12.4 (06-12-2026)

Form 8038-CP MeF

  1. Modernized Electronic Filing (MeF) is received daily and must be input within 48 hours. The taxpayer information is received by email with an attachment “Daily FAST MeF BO Report.” This contains information needed to pull the return from the Employee User Portal (EUP). You will need to pull each return per the report and save in the Shared Drive.

    Caution:

    "Daily FAST MeF BO Report" must be received everyday including weekends. If a daily MeF report is missing, contact the BSP SPP&O Analyst for a manual output of this report.

    Form 8038-CP MeF Preparation

    Steps Instructions
    1. Create two folders in the Shared Drive.
    2. Open the Daily FAST MeF BO Report.
    3. Open EUP.
    4. Upload each return from the Daily FAST MeF BO Report and save in the created folders.
    5. Enter returns into the DPB database. See IRM 4.81.12.5.2, Form 8038-CP MeF and Paper DPB Database Input, for instructions.
    6. Send secure email to Tax Exempt Bonds (TEB) for review and attach the following:

    1. Daily FAST MeF BO Report

    2. Daily Report

    3. Combined MeF PDFs
    7. Any returns referred to TEB, must be Established and Assigned on RCCMS. See IRM 4.81.12.9, for instructions.

    Note:

    MeF returns that have an amount ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ will dropout to ERS for processing.

4.81.12.5 (06-12-2026)

Document Perfection

  1. See instructions for processing Form 8038-CP for paper and MeF.

  2. All editing must be done in "Green" , with the exception of the SPP&O received date that will be in Red. See IRM 4.81.12.3, Form 8038-CP Paper Preparation table, step 4.

    Note:

    The IRS Received Date must be edited in "Red" .

4.81.12.5.1 (06-12-2026)

Paper Return Edits

  1. The following lines may be edited on paper Form 8038-CP returns if blank, missing, different from IDRS or illegible.

    Note:

    If an Acknowledgement correspondence copy is received, do not scan and attach to the back of the return. If an Acknowledgement return copy is received, follow instructions in IRM 4.81.12.3.1, Form 3210 Acknowledgement Copy.

    • Part I, Line 1, Name of entity

    • Part I, Line 2, Employer identification number (EIN)

    • Part II, Line 7, Issuer’s name or "Same"

    • Part II, Line 8, EIN

    • Part II, Line 10, Report number

    • Part III, Line 18, IPD

    • Part III, Line 22, Credit payment

    Note:

    Additional editing may be needed when instructed by BSP SPP&O Analyst or TEB Specialist. They will notate their research findings in the DPB database.

4.81.12.5.2 (06-12-2026)

Form 8038-CP MeF and Paper DPB Database Input

  1. Transcribe information from the MeF and Paper returns into the Direct Pay Bonds (DPB) database system.

    Note:

    If there is a discrepancy, see IRM 4.81.12.5.3 Form 8038-CP Discrepancy Procedures.

    DPB Database Input

    Steps Instructions
    1. Add New Record.
    2. Is this an E-Filed Return?
    3. Enter the IRS Received Date stamped in "Red" for Paper or IRS Received Date in EUP for MeF returns.

    Note:

    On paper returns, any editing to the IRS Received Date must be done in "Red."

    4. Part I, Is the Amended Return box checked?
    5. Enter Part I, Line 2, Employer identification number (EIN).
    6. Enter Part III, Line 18, IPD.
    7. Enter Part II, Line 8, EIN.
    8. Enter Part II, Line 10, Report Number.
    9. Enter Part II, Line 12, Date of Issue.
    10. Enter Part II, Line 14, CUSIP Number.
    11. Enter Part II, Line 17b, Issue Price.
    12. Enter Part III, Line 22, Credit Payment Requested.
    13. Enter Direct Deposit, Line 26a, Routing Number.
    14. Enter Direct Deposit, Line 26c, Account Number.

    Note:

    A hyphen (-) and alpha characters are allowed in this field only.
    15. Enter Batch Number on Paper returns.

  2. After database input is completed, do the following:

    1. Click on the Dupe Check tab for possible duplication. One or more boxes may be highlighted in "Red" . See IRM 4.81.12.7, Possible Duplicates, for additional instructions.

      Note:

      If paper return, do not enter the batch number and pull from the batch.

    2. Click on the TEB Approved Transaction tab and click on the Debit Service link that matches Lines 12, 14, 17b, 18, and/or line 22 and verify the IPD and amount on line 22 matches the DSS.

      Note:

      If there is a box highlighted in "Red" on the same line your verifying, this may be a possible duplicate. See IRM 4.81.12.7, for additional instructions.

4.81.12.5.3 (06-12-2026)

Form 8038-CP Discrepancy Procedures

  1. Never destroy or remove the original entry on a return.

  2. When reviewing Form 8038-CP, a taxpayer may use a prior revision. See the chart below for the revision line numbers.

    Form 8038-CP Revisions Part III Line Numbers

    Rev 4-2009 Rev 1-2010 Rev 6-2010 Rev 1-2012 Rev 1-2020 Rev 1-2022
    Line 23 Line 23 Line 23 Line 23 Line 23 Line 23a
    N/A Line 25b Line 25a Line 25a Line 24 LIne 24a
    N/A Line 25d Line 25c Line 25c Line 25 Line 25
    N/A N/A N/A N/A Line 27a Line 26a
    N/A N/A N/A N/A Line 27c Line 26c

  3. A discrepancy may need to be referred to the BSP SPP&O Analyst or TEB Specialist. Follow the Discrepancy Procedures chart for specific instructions.

    Discrepancy Procedures

    If Form 8038-CP Then
    Amended box is checked, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part I, line 1 is blank and an EIN is on line 2, research IDRS CC INOLES or ENMOD and edit the name on Part I, line 1. If the Name of Entity is a individual name, refer to TEB Specialist and check the Referral to TEB and notate actions taken in the comment box.
    Part I, line 2 is blank and a name is on line 1, research IDRS CC NAMEE. Edit the EIN on Part I, line 2.
    Part I, line 2 EIN is entered and displays "This is a new Payee" message, research the Payee EIN on IDRS CC INOLES.

    1. If the name matches IDRS, press OK and follow the prompts. Continue inputting into the DPB and leave a comment New Payee and refer to TEB Specialist and Cc BSP SPP&O Analyst.

    2. If the name doesn’t match or no record is found on IDRS, press OK, then press cancel. Do not enter into the DPB and refer to TEB Specialist and Cc BSP SPP&O Analyst.
    Part II is blank and Part I, line 2 EIN is valid, write “Same” on Part II, line 7. Enter the EIN from Part I, line 2 for Part II, line 8.
    Part II, line 7 issuer’s name is identical to line 1, and the word "Same" is not present, use IDRS CC INOLES to verify the name control match.

    1. If yes, on Part II, line 7, underline the name control and continue processing.

    2. If no, on Part II, Line 7, edit the name line to match IDRS, underline the name control, and continue processing.
    Part II, line 7 issuer’s name displays the word "Same" , use IDRS CC INOLES to verify the name control match.

    1. If yes, on Part I, line 1, underline name control and continue processing.

    2. If no, on Part I, line 1, edit the name line and underline the name control.

    3. Do not circle out the word “Same” on Part II, line 7, and continue processing.

    4. If the Issuer’s Name is an individual name, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part II, line 7 issuer’s name is not identical to the name on Part I, line 1 and doesn’t say "Same" , use IDRS CC INOLES to verify the name control match.

    1. If yes, on Part II, line 7, underline the name control and continue processing.

    2. If no, on Part II, line 7, edit the name line and underline the name control and continue processing.
    Part II, line 8, EIN is blank and the word "Same" is on Line 7,

    1. Enter the EIN from Part I, line 2.

    2. If a Social Security Number (SSN) is present, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part II, line 8 EIN is the same as line 2 and the name on line 7 doesn’t match line 1 or say "same" , do not enter batch number. Attach return and refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part II, line 8 EIN is missing or fewer than 9 digits and Part II, line 7 doesn’t say "Same" ,

    1. Research CC NAMEE for a valid EIN and edit it on Part II, Line 8. If none available, refer to TEB Specialist.

    2. If a Social Security Number (SSN) is present, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part II, line 10, Report Number is blank and a Schedule A is attached with a report number, edit the report number from Schedule A on to Part II, line 10.
    Part II, line 10, Report Number is blank or out of the range of 401-450, click No, and edit the generated report number from the DBP database on Part II, Line 10.
    Part II, line 12, Date of issue is blank, click enter. If the Date of Issue is outside of ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, refer to TEB Specialist. See IRM 4.81.12.1.2 for more information.
    Part II, line 14, CUSIP is blank, click enter.
    Part II, line 17b Issue Price is blank, click enter.
    Part III, line 18, IPD is blank, For Paper: Scan and refer to TEB Specialist.

    Note:

    For MeF: this is a required field and will be rejected if left blank.
    Part III, line 18, IPD date is incorrect,

    1. For paper: If the IPD doesn’t agree with the day on the DSS, edit the correct the day on the return.

    2. The Month and Year can’t be edited. If the month and year don’t match the DSS, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.

    3. For MeF: Continue processing.
    Part III, line 18 date is Early Filed, don’t input into the DPB Database. All early filed returns must be pulled and given to the BSP SPP&O Analyst. See IRM 4.81.12.5.4, Form 8038-CP Early-Filed, for more information.
    Part III, line 22, Credit Payment is blank, do the following

    1. use the amount shown on Part II, lines 20a through 20f (there can only be one amount), with 21a (add) or 21b (minus), if present, and edit the amount on Part III, line 22.

    2. If lines 20a-f and 21a or 21b is blank and there is an amount on line 19a and line 19c and line 19c is smaller, edit the amount on line 22 and continue processing.

    3. If lines 20a-f, 21a, 21b, and 22 are blank, and there are amounts on line 19a and line 19c and line 19a is smaller, do not process. Refer to the BSP SPP&O Analyst and Cc TEB Specialist for further instructions.

    4. If there is an amount only on line 19a and lines 19c, 20a-f, 21a, 21b, and 22 are blank, refer to the TEB Specialist.
    Part III, line 22 is not blank and there is no link to the Debt Service Schedule (DSS) or the DSS link doesn’t work, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 22 is not blank and the DSS has a "Red" sheet attached to the return, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 22 credit amount exceeds the DSS amount by more than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 22 credit amount is less than the DSS, continue processing.

    Note:

    If there are multiple returns for the same EIN and they don’t match the DSS, add all the amounts of the returns and see if the total amount matches the DSS. Continue processing.
    Part III, line 22 credit amount is ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡, refer to BSP SPP&O Analyst and TEB. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 23a is checked Yes, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 24 is checked No, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 25 is checked Yes, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.

    Note:

    Form 8038-CP (Revision January 2012 and prior, Part III, line 23 indicates Final Return and is checked Yes, follow Part III, line 25 procedures.
    Part III, lines 23a, 24, and/or 25 have both boxes checked, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, lines 23a, 24, and/or 25 are not checked, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 26a, Routing Number is blank, continue processing.
    Part III, line 26c, Account Number is blank, continue processing.
    Part III, line 26a, Routing Number entered and DPB indicates it’s a bad routing number, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.
    Part III, line 26c, Account Number entered and DPB indicates it a bad bank account number, refer to TEB Specialist. Check the Referral to TEB box and notate actions taken in the comment box.

    Note:

    A hyphen may be entered in the bank account, if present.

    Note:

    For more information on referrals to TEB see IRM 4.81.12.6.

4.81.12.5.4 (06-12-2026)

Form 8038-CP Early-Filed

  1. Early filed Form 8038-CP are not entered into the DBP. When identified, they are pulled and given to the BSP SPP&O Analyst for review and proper handling of the return.

  2. Notice 2009-26 Section 3.1 and Notice 2010-35 provide the procedural rules for claiming the refundable credit available under IRC 6431, including the requirement that an issuer must file a Form 8038-CP to claim the credit.

    1. Variable rate bonds is the 45th day after the last interest payment within the quarterly period for which the credit is claimed.

    2. Fixed rate bonds is the 45th day before the applicable IPD, but no earlier than 90 days before the relevant interest date.

      Note:

      Line 17a check box shows whether a Form 8038-CP is for a fixed or variable rate bond.

  3. A paper Form 8038-CP filed more than 120 days ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ before the IPD are considered an early filed return and not processable.

    Note:

    Early filed MeF Form 8038-CP are rejected when filed.

  4. If paper Form 8038-CP is early filed, the following actions are taken.

    1. Cross out date stamps on the Form 8038-CP.

    2. Verify on IDRS the correct Signature Code is available before sending the letter. If signature code is unavailable, give to the BSP SPP&O for proper handling of the return.

    3. On IDRS: Prepare Letter 6245C, Early Filed Form 8038-CP, to return the Form 8038-CP back to the issuer. Use the issuer address shown on Form 8038-CP, Lines 7, 9, and 11.

    4. Use IDRS generated cover sheet or Form 5703, IDRS Letter Enclosure, associate with the correspondence letter and attach to the Form 8038-CP. Route using Form 12634, OIRSC Campus Document Transmittal and send to M/S 6745, CRX.

      Note:

      The CRX team has 3 days from the day you initiate your letter to receive and attach the enclosure.

4.81.12.5.5 (06-12-2026)

Undeliverable Early-Filed for Form 8038-CP

  1. If the early-filed return is received back as undeliverable and is now ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ of the IPD, the return will be accepted, incorporated into a batch, and the compliance review process completed on the Form 8038-CP.

  2. Stamp or write a new IRS received date on the return and ensure all prior date stamps are circled.

  3. If the early filed return is received back as undeliverable, document in the upper left - hand corner Undeliverable and date received. Example: Undeliverable MM-DD-YYYY.

    Note:

    The Statute of Limitations will be based on the date the Form 8038-CP is returned as undeliverable.

4.81.12.5.6 (06-12-2026)

Reduction of Amount of Credit Payment (Line 22)

  1. There are situations that may require Line 22 to be reduced to ≡ ≡ ≡ ≡ ≡. The TEB Specialist will contact you by secure email with instructions for the return or returns if it meets specific requirements.

  2. When a Letter 5836C, Form 8038-CP Claim Incomplete for Processing; No Consideration, is received from ERS or Rejects, TEB will notate in the DPB database the return was processed as "No consideration" and a reduce the credit amount to ≡ ≡ ≡ ≡ ≡ ≡.

  3. The BSP SPP&O Analyst will circle out the amount on line 22 and write ≡ ≡ ≡ ≡ ≡ and send to C&E to be processed.

4.81.12.6 (06-12-2026)

Referrals to TEB

  1. Discrepancies found on returns are referred to TEB by secure email. Scanned paper return with any attachments or MeF return must be attached to the secure email.

  2. This a list of possible referrals to TEB and is not all inclusive list.

    • Bad Routing Number.

    • Bad Account Number.

    • On paper returns, if missing information or incomplete (i.e., IPD, DSS, etc).

    • The IPD Month and Year is missing or incorrect.

    • The IPD and/or Line 22 doesn’t match the DSS.

    • Line 22 is zero and there is an amount on the DSS.

    • If line 22 exceeds the DSS amount by more than ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • If the EIN is not an “authorized transaction” and/or the DSS does not agree then the return.

    • The Issuer’s name doesn’t appear to be a government entity.

    • Name of entity or Issuer’s name is an individual’s name (e.g., John Doe).

    • The designated payee is not the issuer and doesn’t appears to be a Financial Institution (e.g., bank, trust company, credit union, savings & loan) or other qualified designated payer or interest.

    • No DSS is available on the DPB.

    • Possible fraudulent return. ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡

    • A Social Security Number (SSN) is used instead of an EIN.

  3. TEB may call the contact person on Part I or Part II of Form 8038-CP concerning information needed for a processable return such as the IPD, Line 18 of Form 8038-CP.

  4. During the TEB review, TEB Specialist and BSP SPP&O Analyst may have addition steps to complete. This is not at all inclusive list.

    1. If required, the TC 570 box will be checked by TEB during review. TEB Specialist will email BSP SPP&O Analyst to monitor the account for the TC 150 to post. Once posted, BSP SPP&O will input the TC 570.

    2. If required, the TEB Specialist will instructed the BSP SPP&O Analyst to edit on page 1, CCC “O” between lines 18 to 19c area on the dotted portion and write TEGE - DO NOT REFUND CREDIT at the bottom of the return.

    3. On paper returns, TEB may require you to pull a return from a batch. Pull and search the DPB Database for the return, remove the batch number, save and reprint Form 3210.

4.81.12.7 (06-12-2026)

Possible Duplicates

  1. The DPB database will search all records for returns using the payee’s and issuer’s EIN for the tax period. The database will return any results if there are any matches. The results will be shown in the Dupe Check tab of the database. When returns are sent to ERS, they verify IDRS for posting of a TC 150 or TC 976. If none, they will send a secure email to the BSP SPP&O Analyst over ERS and attach the scanned return.

    Paper Possible Duplicate Procedures

    Steps Instructions
    1. Do not enter the Batch Number.
    2. Pull from batch.
    3. In the "Comment" section in the DPB database, notate "Possible Duplicate."
    4. Scan the return and attach to a secure email to the BSP SPP&O Analyst and Cc TEB Specialist. In the subject line state, "Possible Duplicate Return and last 4 digit(s) of the EIN."
    5. Wait for further instructions from the BSP SPP&O Analyst.

    MeF Possible Duplicate Procedures

    Steps Instructions
    1. In the "Comment" section in the DPB database, notate "Possible Duplicate."
    2. Attach a copy of Form 8038-CP and email to the BSP SPP&O Analyst and Cc BSP SPP&O Analyst Transcribers and TEB Specialists. In the subject line state, "Possible Duplicate Return and the last 4 digit(s) of the EIN."
    3. Wait for further instructions from the BSP SPP&O Analyst.

4.81.12.7.1 (06-12-2026)

True Duplicates

  1. A true duplicate condition occurs when the taxpayer files two returns with the exact same EIN, Tax Period, and Report Number.

  2. If TEB determines the return is a true duplicate and there is no correspondence attached, do the following.

    True Duplicate Procedures

    Steps Instructions
    1. Upper left-hand corner of Form 8038-CP, notate True Duplicate.
    2. Line through the return and above this line, notate COPY - DO NOT PROCESS.
    3. Complete Form 9856 with the Controlling DLN, Employee IDRS Number, Date Prepared, M/S 1110, EIN/SSN, Name Control, Form, and Period Ending. Send to Files.

    Note:

    You may need to monitor for the TC 150 to post. Once posted, continue with steps 1-3 above.

    Note:

    If a true duplicate is received with a return to be processed as an acknowledgement copy, following steps 1-3 above for true duplicate and attach to the back of the original return.

  3. On Paper duplicate returns, remove the Batch number from the DPB and reprint the Form 3210.

  4. If correspondence is attached to a True Duplicate, do the following:

    1. Notate "True Duplicate" in the upper right-hand corner of the return.

    2. Route the return and correspondence to Accounts Management, M/S 6710.

  5. A true duplication on MeF returns, the BSP SPP&O Analyst will contact AM to delete the MeF return.

4.81.12.8 (06-12-2026)

Amended Returns

  1. On paper or MeF return, when the Amended Return box is checked follow the instructions below.

    If Then
    Paper filed,

    1. Do not input the return information into the database or edit the return

    2. Send a secure email to the BSP SPP&O Analyst and Cc TEB Specialist. Include a scanned copy of the Form 8038-CP and on the subject line, type "Amended Form 8038-CP Received."

    3. If it’s an amended return, send it to the BSP SPP&O Analyst who will send the return to AM.

    Note:

    If the original return is an MeF, send the paper return to the BSP SPP&O Analyst to route to AM.
    MeF filed,

    1. Do not input the return into the database.

    2. Send a secure email to the BSP SPP&O Analyst and Cc TEB Specialist. Include a copy of the Form 8038-CP and on the subject line, type "Amended MeF Form 8038-CP Received."

4.81.12.9 (06-12-2026)

RCCMS Input

  1. Referrals to TEB must be Established and Assigned on the RCCMS system. The following fields are required and must be completed in the Compliance Activity Information tabs, General (1 of 2) and Codes/Checksheet.

    General (1 of 2) Tab

    Steps Instructions
    1. Select "New" on the Compliance Activity Window. The "Loading Compliance Activity" window will pop-up, click OK.
    2. Update AIMS: Uncheck the check box.
    3. TIN: Enter EIN from Form 8038-CP, Part II, Line 8. If blank, enter the EIN from Part I, Line 2.
    4. Name: Enter the Name as shown on IDRS CC INOLES.
    5. Address: Click on the "Address" box and enter the Address as shown on IDRS CC INOLES.
    6. Type: Enter 8038-CP Return.
    7. Activity Code: Enter 304 - Form 8038-CP
    8. Tax period: Form 8038-CP, Part III, line 18, IPD, enter the Tax Year and Month (e.g., 202X0X).
    9. Report Number: Enter the Report Number from Form 8038-CP, Part II, line 10.
    9. Bond issue date: Enter the Bond issue date from Form 8038-CP, Part II, line 12. If blank, view the DSS for the date and use if available. If unavailable, contact TEB specialist by email.
    10. Bond issue name: Enter the Bond issue name from Form 8038-CP, Part II, line 13. If blank, enter N/A.
    11. Return due: Enter the IPD date from Form 8038-CP, Part III, line 18, ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.
    12. Return received: Enter the IRS Received Date.

  2. Following instructions for Codes/Checksheet tab input.

    Codes/Checksheet Tab

    Steps Instructions
    1. Name control: Enter the name control as shown on IDRS CC INOLES.
    2. Master File type: Enter BMF - Business Master File.
    3. MFT code: Enter 46.
    2. Project code: Enter 4199 - BABs.
    3. Source code: Enter 67 - Referral from Executive Branch.
    4. Status code: Enter 10 - Assigned, Not Started.
    5. Activity grade: Enter 13
    6. Click on Save and Close.
    7. The Save In dialog box displays. The New Case radio button will be selected. In the "Name" box, the established name will appear. Click OK.

    Caution:

    When you have multiple returns with the same TIN, after the first case is established, on the next case entered you must create a new case in the "Save In" dialog box. Enter the name in the Name box, then click OK. This will generate its own established case with its specific report number.

  3. For each established case, upload the Form 8038-CP in each individual Office Document case.

    Office Document

    Steps Instructions
    1. Select the Office Document for the established case.
    2. Select Actions - Post - Office Document. The "Post - Office Document" dialog box appears.
    3. Click Add. Select the Form 8038-CP return to attach, then OK.

  4. When all referral to TEB cases have been entered, you must "Established" and "Assign" all cases to TEB.

    Established and Assign

    Steps Instructions
    1. Highlight all Established cases.
    2. Select Actions - Established. The "Established" dialog box appears, click OK.
    3. Click Send/Receive.
    4. The word "Yes" will appear under the Established field.
    5. Select Actions - Assign/Reassign.
    6. "Assign/Reassign To" dialog box appears, select TEB Specialist from the Assigned employee drop down box, then click OK.
    7. Click Send/Receive.
    8. All Established cases will be removed.
    9. Send email to TEB the cases have been established and assigned.

4.81.12.10 (06-12-2026)

Form 8038-CP Statute of Limitations (SOL)

  1. A claim for credit or refund of the refundable credit for Direct Payment Bond are considered timely filed if filed within three (3) years from the bond IPD listed on the Form 8038-CP.

    Note:

    SOL MeF returns are directed to ERS with Action Code 310.

  2. When the IPD is more than three (3) years before the IRS received date or postmark date stamp, the DBP will display a message requesting specific editing be completed. Follow the Paper SOL Procedures instructions.

    Paper SOL Procedures

    If Then
    the IPD is more than three (3) years before the IRS received date or postmark date stamp, do the following,

    1. Edit the CCC "X" between lines 18 to 19c area on the dotted portion.

    2. Notate in green at the bottom of the return "TEGE - Do Not Refund Credit" .

    3. Edit in the upper left-hand corner of the return "Statute of Limitation."

    4. Continue to enter the return in the DBP with the batch number and enter "Statute of Limitation" in the comments.

    5. Do not established on RCCMS.
    the IPD is less than three (3) years before the IRS received date or postmark date stamp, continue processing.

4.81.12.11 (06-12-2026)

Fraudulent Returns

  1. You may identify indicators of fraudulent returns. The return(s) must be referred to BSP SPP&O Analyst and TEB by secure email.

  2. Possible indicators of fraudulent returns (not all inclusive).

    1. No DSS.

    2. Not established in DPB Database.

    3. Payee and/or issuer is not a government entity or bank institution.

    4. The claims don’t agree with the terms of the type of bond.

  3. Scan the return and save in Shared Drive folder.

  4. Establish and assign Paper and MeF returns on RCCMS.

  5. Route Paper return to TEB Manager:
    Internal Revenue Service
    Tax Exempt Bonds
    Technical Group 7214
    5333 Getwell RD, STOP 70G
    Memphis TN 38118

4.81.12.12 (06-12-2026)

Frivolous Returns

  1. You may identify indicators of frivolous returns. The return(s) must be referred to BSP SPP&O Analyst and TEB by secure email.

  2. Possible indicators of frivolous returns (not all inclusive).

    1. Returns received when the Date of Issue is greater than 12/31/2017.

    2. Multiple IPD dates on line 18.

    3. No valid EIN.

    4. SSN is present.

    5. The claims don’t agree with the terms of the type of bond.

    6. Handwritten return with all fields or partially or improperly completed.

  3. Scan the return and save in Shared Drive folder.

  4. Establish and assign MeF returns on RCCMS.

  5. Do not established or assign Paper returns on RCCMS.

  6. Route Paper return to TEB Manager:
    Internal Revenue Service
    Tax Exempt Bonds
    Technical Group 7214
    5333 Getwell RD, STOP 70G
    Memphis TN 38118

4.81.12.13 (06-12-2026)

Disallowed Returns

  1. When there is an error on a Form 8038-CP due to missing or incomplete information, ERS/Rejects will issue a Letter 6436C, Form 8038-CP, Missing or Incomplete Information Request, to the filer requesting the correct information. If the taxpayer doesn’t respond within 45 days, ERS/Rejects processes the Form 8038-CP as a "No Consideration" , ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and edits CCC “3” between lines 18 to 19c area on the dotted portion.

  2. ERS will forward a scanned copy of the Form 8038-CP by secured e-mail to BSP SPP&O Analyst. ERS will issue a Letter 5836C, Form 8038-CP Claim Incomplete for Processing; No Consideration. In the email, they will annotate “No consideration - Letter 5836C sent”. The BSP SPP&O Analyst will update the DPB database to show the ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡ and annotate the return was processed as "No Consideration" .

Exhibit 4.81.12-1

Computer Condition Codes

The following Computer Condition Codes (CCC) are acceptable and is edited between lines 18 to 19c area on the dotted portion.

CCC Definition Use when
3 No Reply or No Consideration. The taxpayer doesn’t respond to Letter 6436C within 45 days.

Note:

Edited by ERS/Rejects
O A refund over ≡ ≡ ≡ ≡ ≡ ≡ ≡, which is the amount set for manual refunds to be issued; and a Form 8038-CP, line 22 has a refund over ≡ ≡ ≡ ≡ ≡ ≡ ≡ ≡.

Note:

CCC O freezes the affected tax module unless or until a TC840 transaction is posted.

 Stopping a refund on paper returns only.

Note:

BSP SPP&O Analyst will edit as directed by TEB Specialist only.
X Prevents the release of credits or refunds. Statute of Limitation.

Note:

Edited by BSP SPP&O Analyst.