Under Internal Revenue Code 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. Issuers of tax-exempt bonds and any other bonds subject to the provisions of Internal Revenue Code section 148 must use this form to make arbitrage rebate and related payments.
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Other Items You May Find Useful
Publication 4077 PDF, Tax-Exempt Bonds for 501(c)(3) Charitable Organizations (PDF)
Publication 4079 PDF, Tax-Exempt Governmental Bonds Compliance Guide (PDF)