Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, is used to claim refundable tax credits payable to issuers of
- qualified build America bonds (BABs)
- recovery zone economic development bonds (RZEDBs) under sections 54AA, 1400U-2 and 6431 of the Internal Revenue Code
- specified tax credit bonds (STCBs) under Code sections 54A and 6431(f)
These FAQs are offered to assist issuers but are not formal guidance.
What legislation authorizes BABs, RZEDBs and STCBs and the Federal direct payment credits?
These bonds and the Federal direct payment credits were authorized by the American Recovery and Reinvestment Act of 2009 (ARRA) and by the Hiring Incentives to Restore Employment Act of 2010 (HIRE).
Where can I find the initial guidance for BABs, RZEDBs and STCBs and the implementation plans for the refundable credit payment procedures for these bonds?
What is the filing due date for Form 8038-CP?
Fixed Rate Bonds: For timely payment of subsidy on a fixed rate bond, Form 8038-CP must be filed no later than 45 days before the relevant interest payment date but no earlier than 90 days before the relevant interest payment date.
Example: If filing a fixed rate bond (ie Line 17(c) is checked Fixed rate bond) and the Interest Payment Date (IPD) on line 18 is 01/15/2016, the due date of the return is 45 days before the IPD which is December 2, 2015.
Variable Rate Bonds: For timely payment of subsidy on a variable rate bond, when the issuer knows the interest payment amount of variable rate bonds prior to the interest payment date, the issuer may file Form 8038-CP within the same timelines as fixed rate bonds (45 days before the relevant interest payment date but no earlier than 90 days before the relevant interest payment date). Please refer to the fixed rate bond example, above. When completing the debt service schedule attached to the Form 8038-B or Form 8038-TC for these types of bonds, the issuer should include the known debt service and enter the interest payment dates and outstanding principal amounts for the unknown years.
When the issuer does not know the interest payment amount of variable rate bonds prior to the interest payment date, the issuer must aggregate all credit payments on a quarterly basis and file Form 8038-CP for reimbursement in arrears no later than 45 days after the last interest payment date within the quarterly period for which reimbursement is being requested.
Example: If filing a variable rate bond (ie Line 17(c) is checked Variable rate bond) and the Interest Payment Date (IPD) on line 18 is 01/15/2016, the due date of the return is 45 days after the last lPD within the quarterly period for which reimbursement is being request, which is February 29, 2016.
These answers for the time frames for filing Form 8038-CP for fixed and variable rate bonds are provided in Section 3.1(b) and (c) of Notice 2009-26 and Section 3.2 and 3.3 of Notice 2010-35 and the instructions for Form 8038-CP.
What is the period within which a claim on a Form 8038-CP requesting a refundable credit may be filed?
A claim for credit or refund of the refundable credit for qualified bonds must be filed within 3 years of the bond interest payment date or 2 years from the time the issuer made the bond interest payment, whichever of such periods expires later. Because Forms 8038-CP can function as both a return and a claim for refund, an initial Form 8038-CP filed more than three years after the date of the bond interest payment date may be timely for purposes of section 6511(a), but the amount of the credit or refund will be limited, pursuant to section 8511(b)(2)(A), to the amount of the bond interest payment made within three years of the date the form was filed.
Does an issuer receive Acknowledgment of receipt of Form 8038-CP?
The return acknowledgement process for the Form 8038-CP is automated. A CP152A notice is sent to the issuer when the form is fully processed. This notice provides information necessary when the contacting the IRS. Attaching a copy of this notice to all correspondence and documents relating to the filed Form 8038-CP will help facilitate a response by the IRS. If contact is made via our customer service number (1-877-829-5500), this notice has information that may be requested by the customer service representative to identify the proper return.
Does the IRS return Acknowledgement copies of filed Form 8038-CPs?
No. The IRS is does not return Acknowledge copies of Form 8038-CP returns. The issuer may use certified mail, including the return receipt option, or use one of the many commercial delivery services available, such as FedEx, UPS, DHL, etc., where the tracking history may document receipt by the IRS.
Whom can the issuer contact regarding Form 8038-CP payment questions?
The issuer, or the trustee, if the trustee is authorized by the issuer on Form 8038-CP, may call TE/GE Customer Service at 1-877-829-5500.
If payment has not been received and the return has been filed at least 45 days before the interest payment date, and it is less than 3 weeks before the interest payment date, please contact TE/GE Customer Service at 1-877-829-5500.
You will need:
- the EIN(s) of the Part I entity and the Part II issuer (if applicable),
- the interest payment date,
- the report number (as indicated on the CP152A notice), and
- the anticipated refundable credit payment amount.
- In addition, you may need to also provide the CUSIP # of the issue (if applicable) and the issue price of the issue.
Why may the Form 8038-CP refundable credit payment differ from the requested refundable credit payment amount?
A Form 8038-CP refundable credit payment may be adjusted for:
- offsets to collect delinquent debts owed to Federal and state government agencies, for which Notice CP-138 is issued, and
- the applicable sequestration credit percentage, or
- credit interest paid for delayed payments for which a CP152A notice is issued.
What resources are available to an issuer for questions regarding Direct Pay Bonds?
How can an issuer ensure that the Routing and Account Numbers on a Form 8038-CP request for payment are accurate?
The IRS recommends that each filer of Form 8038-CP that elects a direct deposit of a refundable credit payment verify that the correct ACH routing and account numbers (which may or may not be the same as the routing number displayed on a check) are shown in lines 25a and 25c. Issuers should check with their financial institution to get the correct ACH routing and account numbers and to make sure their direct deposit will be accepted. The routing number must be nine digits with the first two digits a 01 through 12 or 21 through 32. The account number can be up to 17 characters.
What happens if the issuer provides an inaccurate Routing and/or Account Number on a Form 8038-CP request for payment?
Inaccurate direct deposit information on Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, may cause a delay in the payment of a request for a refundable credit payment. If routing or account numbers on a filed Form 8038-CP are inaccurate, the direct deposit could be rejected. If a direct deposit is rejected, the IRS will mail a paper check to the issuer address shown on the Form 8038-CP.
The IRS is not responsible for lost refundable credit payments if you enter the incorrect routing and/or account information. Questions about the status of a direct deposit of a refundable credit payment should be directed to TE/GE Customer Account Services at 1-877-829-5500.
Where can an issuer get information on the Sequestration Reduction Rates for a Form 8038-CP refundable credit payment?
Tax Exempt Bonds publishes an article each Fiscal Year providing updated sequestration information. See Effect of Sequestration on State & Local Government Filers of Form 8038-CP.
Can an issuer file a Form 8038-CP claiming a refundable credit on a Qualified Zone Academy Bond issued after December 31, 2010?
No. Notice 2015-11 provides that the direct pay subsidy option does not apply to any national zone academy bond limitation for years after 2010 or any carryforward of any such limitation.
What should an issuer do if an error is discovered on a previously filed Form 8038-CP?
If correcting an error that was not a final return, Lines 21a and 21b are available to correct prior mistakes to credit payments related to prior filings of Form 8038-CP for the respective issue.
An amended return can be filed to correct a previously filed return as explained in the Instructions for Form 8038-CP.
If an issuer files Form 8038-CP with our current address, even if it has changed since filing Form 8038-B or Form 8038-TC will we receive payment?
Form 8038-CP permits credit payments to be sent either by direct deposit as authorized by the issuer or, if direct deposit is not elected by the issuer, by paper check to the addressee listed in Part I on the 8038-CP. As noted in section 3.1(a) of Notice 2009-26, the IRS originally sent payments to the requested recipient’s “last known address”, as that phrase is defined and determined under section 301.6212-2 of the Treasury Regulations and Rev. Proc. 2001-18, 2001-1 C.B. 708, or any successor guidance, even if it was not the address included on Form 8038-CP.
If BABs, RZEDBs or STCBs are issued to finance capital expenditures for a project, what form or forms should be filed to request the credit?
A separate Form 8038-CP must be filed for BABs (Direct Pay), RZEDBs and STCBs regardless of whether they may or may not constitute part of a single issue. One Form 8038-CP should be filed reflecting the 35% credit on the BABs (Direct Pay); one Form 8038-CP should be filed reflecting the 45% credit on the RZEDBs; and one Form 8038-CP should be filed reflecting the appropriate applicable percentage for STCBs.
If an issue of BABs or STCBs contains both variable rate bonds and fixed rate bonds, must they be filed on separate Forms 8038-CP?
Yes. If an issue of BABs or STCBs contains both variable rate bonds and fixed rate bonds, separate Forms 8038-CP must be filed for variable rate bonds and fixed rate bonds. (These amounts should match the amount of the respective debt service schedules attached to Form 8038-B or Form 8038-TC.)
If a single issue of STCBs consist of multiple maturities, must they be filed on separate Forms 8038-CP?
For qualified school construction bonds or qualified zone academy bonds with multiple maturities, the refundable credit payments for all maturities must be requested on a single Form 8038-CP for each interest payment date. For qualified energy conservation bonds and the new clean renewable energy bonds, the refundable credit payment for each maturity must be requested on a separate Form 8038-CP for each interest payment date. See Instructions for Form 8038-CP.
Is the applicable percentage of the refundable credits payable on BABs, RZEDBs, and STCBs, applied against pre-issuance accrued interest?
No. Pre-issuance accrued interest is considered a return of capital and not a payment for the use of money. As such, the applicable percentage of refundable credits payable for interest on BABs, RZEDBs and STCBs are not allowed for pre-issuance accrued interest. The amount of interest reported on Lines 19a or 19c of Form 8038-CP should not include pre-issuance accrued interest. (Also, when attaching the debt service schedules to Form 8038-B or Form 8038-TC, do not include pre-issuance accrued interest in the schedules.)
If Form 8038-CP is filed late, will the issuer still receive the credit payment?
Late filed returns will be processed; however, the credits may not be paid by the interest payment date to which they relate. Refunds on returns filed after the normal statutory period of limitations for claims may be barred.
Can the trustee sign Form 8038-CP?
No. Form 8038-CP is a return of the issuer, and as such, must be signed by an officer of the issuer with the authority to: (i) bind the issuer; (ii) authorize payment to be sent to the entity listed in Part I; and (iii) authorize the IRS to communicate with any person listed as a designee of the issuer.
Can the issuer designate a conduit borrower to receive the credit payment?
Section 6431 of the Code states the Secretary shall pay the credit to the issuer of the bonds, or to any person who makes such interest payments on behalf of the issuer. The person who makes interest payments on behalf of the issuer is generally the bond trustee or other designated paying agent. Accordingly, the IRS is authorized to make refund payments to the actual issuer of the bonds or to a trustee or paying agent who is making such interest payments on behalf of the issuer.
If the issuer designates another person to receive the credit payments in Part I of Form 8038-CP, such as a trustee bank, will the issuer’s credit payment be subject to tax and other liability offsets of that designated representative?
No. The credit is paid with respect to the issuer of the bonds and liabilities of other entities are not considered for offset purposes.
Who can file Form 8038-CP for pool bonds?
Either issuer may file Form 8038-CP for pool bonds; provided that only one issuer (either the pool issuer or the conduit borrower, but not both) files Form 8038-CP for the same bond issue within a pool.