ARBITRAGE REBATE CALCULATIONS
The team at Robert Thomas CPA, LLC has been providing arbitrage rebate services for a breadth of transaction types for 35 years, working with issuers and bond counsel firms throughout the country. Our team maintains a working knowledge of the regulatory requirements under the Internal Revenue Code and uses current technology to ensure efficient delivery of compliant calculations. In addition, our experienced team understands the reporting required under the Code and can guide our clients in establishing internal policy for best practices.
What is Arbitrage Rebate?
As explained in the IRS Publication 4079, Issuers of tax-exempt bonds, including governmental bonds, are generally subject to investment or arbitrage limitations under IRC Section 148. Failure to comply with those arbitrage limitations will result in the bonds being arbitrage bonds and interest on the bonds being taxable.
In general, arbitrage is earned when the gross proceeds of an issue are used to acquire investments that earn a yield that is materially higher than the yield on the bonds of the issue. Earning arbitrage is permitted in certain circumstances. In some circumstances arbitrage may be earned but must be paid, or rebated to the U.S. Department of the Treasury. In some cases, an issuer may be able to reduce the yield on an investment for arbitrage purposes and thereby avoid an arbitrage violation by making a yield reduction payment to the U.S. Treasury.
An issuer must comply with two general sets of arbitrage rules: (1) the yield restriction requirements of Section 148(a) and (2) the rebate requirements of Section 148(f). An issuer may meet one of these rules but still have arbitrage bonds because it failed to meet the other. Even though interconnected, both sets of rules have their own distinct requirements.
In general, arbitrage is earned when the gross proceeds of an issue are used to acquire investments that earn a yield that is materially higher than the yield on the bonds of the issue. Earning arbitrage is permitted in certain circumstances. In some circumstances arbitrage may be earned but must be paid, or rebated to the U.S. Department of the Treasury. In some cases, an issuer may be able to reduce the yield on an investment for arbitrage purposes and thereby avoid an arbitrage violation by making a yield reduction payment to the U.S. Treasury.
An issuer must comply with two general sets of arbitrage rules: (1) the yield restriction requirements of Section 148(a) and (2) the rebate requirements of Section 148(f). An issuer may meet one of these rules but still have arbitrage bonds because it failed to meet the other. Even though interconnected, both sets of rules have their own distinct requirements.
Robert Thomas CPA, LLC can help
Tax-Exempt bond compliance can be complicated. Without the right expertise, mistakes can occur in the calculation process and can be costly. Robert Thomas CPA, LLC's expertise can help you navigate the complexities of arbitrage rebate compliance. We tailor our services to our clients specific needs and offer competitive rates. To learn more about our arbitrage rebate practice or to seek a quote for services please reach out to us at info@rthomascpa.com or call one of our offices using the contact information located here.
Sample Reports
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Accounting for every detail.
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