Tax Exempt Bonds Community Updates

New Form 8038-CP and Instructions

New Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds (PDF) and new instructions (PDF) dated January 2020 are now available. Form 8038-CP is used to claim refundable tax credit payments payable to issuers of qualified Build America Bonds, Recovery Zone Economic Development Bonds under former IRC Sections 54AA and 1400U-2 and specified tax credit bonds under former IRC Sections 54A and 6431(f).

Issuers should use the January 2020 version of Form 8038-CP for new submissions to the IRS. Using the old version of Form 8038-CP may cause a delay in a request for credit payment. Do not submit a new filing using the updated form if you have already mailed an older version of Form 8038-CP to the IRS.

Please visit the Interactive Form 8038-CP and Important Processing Changes page on IRS.gov for more information.

Reorganization

Effective November 24, 2019, the Office of Government Entities (GE) was reestablished and now includes separate offices for Tax Exempt Bonds (TEB) and Indian Tribal Governments (ITG). GE also has responsibilities for Federal, State and Local-Employment Tax (FSL-ET) and two correspondence units. The reorganization will help us serve our customers more efficiently. Angela Gartland is the acting Director of Government Entities. Allyson Belsome is the program manager for TEB. Telly Meier is the program manager for ITG.

Help Improve TEB’s Webpages
Tax Exempt Bonds needs your help to improve its webpages and make it easier for you to find TEB information on IRS.gov. Please complete this short study (10 minutes) before November 12, 2019, to provide your feedback.
 
New Instructions for Forms 2848 and 8821
Instructions for Forms 2848 and 8821 are now available. These instructions will help tax-advantaged bond issuers, conduit borrowers and other related taxpayers complete Form 2848, Power of Attorney and Declaration Representative, and Form 8821, Tax Information Authorization

Notice 2019-39

Notice 2019-39 clarifies the rules that apply to current refundings for targeted bond programs, including Tribal Economic Development Bonds (TEDBs). This notice is in response to requests for clarification on whether bonds for certain targeted bond programs may be refinanced without applying for a new allocation of volume cap.

It provides guidance on refinancings of TEDBs and targeted bonds for disaster relief bond programs, generally eliminating the need to provide guidance on a program-by-program basis.

This notice applies to all current refunding issues that are issued on or after May 22, 2019. Issuers may also apply this notice to current refunding issues that are issued before May 22, 2019.

Private Business Use Issue Snapshots

The IRS has issued two new Issue Snapshots that support examinations to determine if federal government use and management contracts cause excessive private business use that adversely affects the tax-exempt status of public safety bonds.

• Private Business Use - Federal Use of Tax-Exempt Financed Prison Facilities Discusses rules that apply to federal government use of tax-exempt bond financed facilities and when that use may be private business use.
• Private Business Use - Management Contracts Discusses rules that apply to management contracts for tax-exempt bond financed facilities and when these contracts may be private business use.

Issue Snapshots are IRS employee job aids that provide analysis and resources along with audit tips or issue indicators for technical tax issues.

Correcting Excessive Private Business Use Violations

Self-Correction: Bond issuers may be able to use self-correction to avoid violations related to excessive private business use that adversely affect the tax-advantaged status of their bonds through remedial actions provided in Treasury Regulation 1.141-12 and Revenue Procedure 2018-26 (PDF).

TEB Voluntary Closing Agreement Program (TEB VCAP): For excessive private business use that cannot be remediated through self-correction, bond issuers can use TEB VCAP to resolve violations.

IRS Secure Messaging Pilot for Tax Exempt Bonds

Tax Exempt Bonds is beginning a pilot to test the use of the IRS Secure Messaging platform for TEB examinations. The IRS Secure Messaging platform will allow you to communicate online with us about your bond examination.

• Correspond with the examination agent through your web browser
• Electronically submit requested documentation quickly and securely
• Eliminate paper and postage
• Reduce the need to call or wait for mail delivery

Issuers, authorized conduit borrowers and authorized representatives invited to participate in the pilot can use IRS Secure Messaging. TEB examinations started before April 30 and TEB VCAP are not a part of this pilot.

Look for your invitation to join the IRS secure messaging pilot included in your bond examination letter.

You can find more information at IRS.gov/tebconnect. If you have any questions about using IRS Secure Messaging or are having trouble signing into the platform, please ask your TEB agent for help.

Issue Snapshots

Issue Snapshots are IRS employee job aids that provide analysis and resources along with audit tips or issue indicators for technical tax issues. The most recent Issue Snapshots from Tax Exempt Bonds are:

• Determining if a Guaranteed Investment Contract was Purchased at Fair Market Value - This issue snapshot discusses the safe harbor requirements an issuer must satisfy to establish that a guaranteed investment contract was purchased at fair market value. 
• Recovery Zone Bonds, Clean Renewable Energy Bonds, Qualified Tax Credit Bonds and Tribal Economic Development Bonds Volume Cap (National Limitation) - The volume cap for particular types of bonds is allocated by the IRS, state or local volume cap administrators, or the Secretary of the Interior for allocations to Indian schools for Qualified School Construction Bonds.
• Rebate & Yield Reduction: Required Payment Dates for Interim Computation Dates - This issue snapshot discusses the relationship between the required payment date for rebate or yield reduction payments and the use of interim computation dates as part of determining the amount of rebate or yield reduction payment.
• Rebate & Yield Reduction: Next Required Computation Date - This issue snapshot discusses the determination of the next required computation date following use of an interim computation date to determine the amount of rebate or yield reduction payment.
• Rebate & Yield Reduction: Use of Interim Computation Dates in Late Rebate Calculations - This issue snapshot discusses the use of interim computation dates to determine the amount of rebate or yield reduction payment due when the payment is being made more than 60 days after the required computation date.

Issue Snapshots

This Tax Exempt Bonds Issue Snapshot addresses the Maturity Limitation for Certain Private Activity Bonds that must be satisfied to be qualified private activity bonds. Visit Issue Snapshots periodically for any new or updated snapshots.

Tax Exempt Bonds Webinars

First-time issuers of tax-advantaged bonds should watch TEB’s three-part webinar series on how to maintain the tax-advantaged status of your bonds.

• Part I Introductory Module 
• Part II Private Business Use Module 
• Part III Arbitrage Module

Watch this webinar to learn about TEB’s tax-advantaged bonds examination process.

• The Tax Exempt Bonds Examination Process

TEB’s three-part webinar series on conduit issuers offers a basic overview of tax-advantaged debt obligations.

• Part 1: Conduit Issuers for Tax-exempt Financings - Overview 
• Part 2: Conduit Issuer Responsibilities
• Part 3: Conduit Issuer Policy and Procedural Considerations

Additional TEB webinars are available at IRSvideos.gov.

Issue Snapshots

Issue Snapshots are IRS employee job aids that provide analysis and resources along with audit tips or issue indicators for a given technical tax issue. The most recent Issue Snapshots from Tax Exempt Bonds are: 

Rehabilitation Requirement under IRC Section 147(d) for Financing Acquisitions of Existing Property
Discusses the rehabilitation requirement that must be met when the net proceeds of a bond issue subject to Section 147(d) are used to acquire used property. 

Qualified Residential Rental Property – Multifamily Housing Bonds
Discusses the residential rental property requirements of IRC Section 142(d), including what types of property can be financed and the qualified uses of that property.

Sale or Disposition of a Bond Financed IRC Section 501(c)(3) Facility
Remedial action provisions that may remediate what would otherwise be a violation of Section 145(a) require particular actions during specific timeframes. 

Bonds with a Qualified Hedge – Hedge Termination
Addresses the rules that apply to terminations and deemed terminations of qualified hedges.

“Deep Discount”: Effect on Exempt Facility Bonds Compliance
Original issue discount in the sale of exempt facility bonds and small issue bonds may affect compliance with the 95% expenditure requirement through the addition of "imputed proceeds" to the amount of net proceeds. This Issue Snapshot discusses the regulations that govern the determination of the amount of imputed proceeds that arise from deep discount sales.

Requirement to Spend Available Project Proceeds of Qualified Tax Credit Bonds within 3 Years of Date of Issuance
Qualified tax-credit bonds have requirements on how much of the proceeds must be spent on a qualified use and when the proceeds must be used for that qualified use. This Issue Snapshot discusses the spending rules and the permitted remediation for these bonds.

95% Expenditure Requirement for Exempt Facility Bonds
Exempt facility bonds have requirements that 95% or more of their net proceeds must be used to provide an exempt facility. This Issue Snapshot discusses the spending rules and the permitted remediation for these bonds.

Publication 5271, Complying with Arbitrage Requirements: A Guide for Issuers of Tax-Exempt Bonds
This new publication is a basic guide to the yield restriction and rebate requirements (arbitrage requirements) of Internal Revenue Code Section 148 and related regulations. Information in the guide can help issuers and conduit borrowers comply with their obligations and prevent violations of the arbitrage requirements.

Tax Exempt Bonds Phase I Training Text
Basic lessons that examine the rules applicable to tax-advantaged bonds, discuss the appropriate use of bond proceeds and introduce the arbitrage, yield restriction and rebate concepts.

Tax Exempt Bonds Phase II Training Text
Intermediate lessons supplement the basic lessons in Phase I, including advanced topics in arbitrage and rebate.

Tax Exempt Bonds Phase III Training Text
Advanced lessons that examine the rules applicable to refundings, reissuances, pooled financing issues and IRC Section 6700 penalties.

Form 8038 series receipt acknowledgements
The return acknowledgement process for the Form 8038 series returns is automated. The IRS will send you a Notice CP152, CP152A or Letter 86C for each form you file. Don’t include an acknowledgement copy of your return with your filing; it may delay processing or cause a duplicate filing.

Avoid Form 8038-CP processing delays
All required lines must be completed on your Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, before we can process it. We’ll request any missing information from you by mail, leading to delays in getting your refund. To avoid these delays, use our interactive Form 8038-CP. Complete it in the order presented and you’ll be alerted to missing fields and other errors.

Form 8038 Corner
The Form 8038 Corner on IRS.gov has links to the Form 8038 series returns, filing tips and the sequestration rates that affect Form 8038-CP filers

IRM 4.81.5 Interim Guidance on New Case Closing Procedures
Tax Exempts Bonds issued interim guidance effective October 18, 2016 to update IRM 4.81.5 regarding New Case Closing Procedures.

FY2017 Update: 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, certain automatic reductions will take place as of October 1, 2016. These required reductions include a reduction to the refundable credit under section 6431 of the Internal Revenue Code applicable to certain qualified bonds.

Understanding the Tax Exempt Bonds Examination Process
New guide discusses general rules and procedures that we follow in examinations and how to correct certain compliance problems.

Form 8038-CP FAQs
How and when to file a Return for Credit Payments to Issuers of Qualified Bonds to claim refundable tax credits payable to issuers of certain bonds.

IRS Revises Publications for Tax-Exempt Bonds
The Office of Tax Exempt Bonds, of the Internal Revenue Service, Tax Exempt and Government Entities Division today announced the release of revised publications for municipalities and other issuers of tax-exempt bonds.

IRS Makes Changes to Its Advisory Committee on Tax Exempt and Government Entities (ACT)
The Internal Revenue Service has announced changes to its Advisory Committee on Tax Exempt and Government Entities (ACT) including a reduction in the number of people on the committee and a revision to its focus.

Published Volume Cap Limit for Tribal Economic Development Bonds
IRS announces the Published Volume Cap Limit for applications for allocations of national bond volume limitation authority to issuers of tribal economic development bonds for periods beginning in 2016.

Published Volume Cap Limits and Available Amounts for New Clean Renewable Energy Bonds
IRS announces the Published Volume Cap Limits and the available volume caps for periods beginning in 2016, for applications for allocations of the national volume cap to issuers of New Clean Renewable Energy Bonds.

FY2016 Update: 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, certain automatic reductions will take place as of October 1, 2015. These required reductions include a reduction to the refundable credit under section 6431 of the Internal Revenue Code applicable to certain qualified bonds.

Mailing Address for Notices of Defeasance and Certain Elections Required by Treasury Regulations
Mailing address for notices of defeasance under Treasury Regulations 1.141-12(d)(3), Treasury Regulations1.142-2(c)(2), and Notices of Election under Treasury Regulations 1.142(f)(4)-1.

Provide Accurate Routing and Account Numbers on Form 8038-CP to Avoid Delayed Payments
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 credit payment.

Notice 2015-12 (New Clean Renewable Energy Bonds Volume Cap Application)
This Notice (updated to clarify the definition of qualified facility under section 45(d) of the Internal Revenue Code) solicits applications for allocations of the remaining available amount of the national limitation (volume cap) for new clean renewable energy bonds (New CREBs). The available amounts include certain amounts previously allocated and subsequently forfeited. This Notice also provides related guidance on the following: (1) application requirements and forms for requests for volume cap allocations; and (2) the method that will be used to allocate the volume cap. The IRS will update the Volume Cap Limit and the available amounts by publishing these updates on the IRS website approximately every sixty days until the applicable volume cap is fully allocated.

Notice 2015-11 (Qualified Zone Academy Bond Allocations for 2014)
This notice sets forth the maximum face amount of Qualified Zone Academy Bonds (QZABs) that may be issued for each State for the calendar year 2014 under § 54E(c)(2) of the Internal Revenue Code. Under § 54A(e)(3), the term State includes the District of Columbia and any possession of the United States.

Announcement 2015-2 (Simplified VCAP Process for Issuers of Qualified 501(c)(3) Bonds)
This Announcement provides a simplified VCAP process for issuers of qualified 501(c)(3) bonds, as defined in the Announcement, to request a closing agreement in situations in which the borrower of the proceeds of the bonds received Prospective Reinstatement, as defined in the Announcement, after its tax-exempt status was automatically revoked under section 6033(j)(1) of the Internal Revenue Code (the “Code”).