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Our Arbitrage Rebate Computation & Compliance Service Includes:

• Review the legal documents executed in connection with the bonds to identify and separately account for the proceeds that are subject to rebate and yield restriction.
• Prepare an independent calculation of the yield on the bonds.
• Analyze and classify each and every transaction based on financial information provided by the issuer, borrower or the trustee.
• Ascertain whether certain Project Funds may qualify for exception from rebate under the six-month, 18-month or two-year expenditure exceptions.
• Prepare a summary of the investment activity for all investments subject to arbitrage rebate.  Included with this summary will be a computation of the arbitrage rebate liability and, for comparison purposes, a computation of the yield on the investments.
• Deliver our report, with computations attached, showing the amount of arbitrage rebate liability, if any.
• Prepare Internal Revenue Service Form 8038-T and provide instructions relative to filing and paying the liability, if any.
• Assist, as necessary, with any Internal Revenue Service inquiry.
• Provide ongoing advice about the impact of proposed and promulgated regulations on arbitrage compliance obligations.
• The certification that all computations performed are in accordance with Section 148 of the Internal Revenue Code.
• The guarantee of complete and accurate arbitrage computations by CFS America, Inc.

       Complete required reporting documents

CFS America, Inc. prepares all IRS fillings for its clients including Form 8038-T and any accompanying documentation, should a rebate payment be required.

 

How Do I Know If Arbitrage Rebate Requirements Apply to Me?

   The Arbitrage Rebate requirements apply to virtually all issuers of tax-exempt obligations, requiring issuers to "rebate" any excess earned from the investment of tax-exempt bond proceeds in taxable securities. Issuers must pay any liabilities due to the Internal Revenue Service at least every five years and at the final maturity date of each issue.

   Failure to comply with the arbitrage rebate requirements may result in the loss of the tax-exempt status of the obligations, or the issue may be subjected to severe penalties and interest.

   The arbitrage requirements provide several exceptions, which, if met, will exempt a portion or an entire issue from the mandate to rebate excess earnings. However, these exceptions can be extremely complex and detailed in their application. Issuers who believe that a rebate exception has been met often learn that the detailed requirements of the exceptions have not been properly satisfied, subjecting the issue to rebate. It is important therefore, for issuers to consult an arbitrage rebate expert to determine proper compliance with the hundreds of pages of federal regulations.

When Should Arbitrage Rebate be Calculated?

Currently, the IRS requires a computation of rebate at a minimum of every five years a debt issuance is outstanding. Additionally, many trust agreements require an annual computation of the arbitrage rebate. Failure to comply with rebate requirements may subject the financing to loss of tax-exempt status and the issuer to substantial penalties.

CFS America works with their clients to provide identification of the rebate liability and the blended rate of return from all investments.  Compliance with the tax code is guaranteed.

The Challenge of Tax Compliance

The IRS has been increasing their enforcement activities regarding tax-exempt bonds. The calculations of arbitrage rebate and other aspects of law in this area are complex and continue to be a concern for all organizations issuing tax-exempt debt.

The arbitrage restrictions of the Tax Reform Act of 1986 and subsequent revisions have significantly impacted the requirements of accounting for proceeds from the issuance of tax-exempt bonds. We can assist you with arbitrage-related

services for your tax-exempt issues and in monitoring compliance with the tax law.

How We Help

   CFS America can help you meet the complex compliance requirements of your tax-exempt financing by providing you with professional arbitrage rebate computation services. Our team of professionals is dedicated to remaining current with arbitrage regulations. We are committed to delivering a quality product in a timely manner at a reasonable cost.

Arbitrage rebate computations can be prepared on an annual basis, or at the end of each five year period, over the life of the tax-exempt financing. Fees for these services will vary depending on the frequency of the computation, as well as the structure of the tax-exempt financing.

The regulations include many exceptions, exemptions and elections as they relate to your particular financing situation.   At CFS America we make it our business to know the regulations for you.