THE SHORT ANSWER
Form 8038-T is the IRS form an issuer files to pay arbitrage rebate and the related amounts: yield reduction payments, the 1.5% penalty in lieu of rebate, the penalty to end that election, and late-payment penalties and interest, with a separate form for each issue. Filing follows the payment deadlines: each rebate payment is due no later than 60 days after the computation date it relates to.
Form 8038-T is the IRS form an issuer files to pay arbitrage rebate and the amounts that travel with it: yield reduction payments, the 1.5 percent penalty in lieu of rebate, the penalty to end that election, and late-payment penalties and interest.
Filing follows the payments rather than an annual calendar: each rebate payment is due no later than 60 days after the computation date it relates to (Treas. Reg. §1.148-3(g)), so filings follow an issue's computation dates and spending periods across its life.
This page sits inside the arbitrage rules, and it walks through the filing deadlines, the lines the form asks about, the penalty for a late or short payment, and how Form 8038-T differs from Forms 8038-G and 8038.
When is Form 8038-T due?
Form 8038-T is due with the payment it accompanies, and the payment deadlines come from the rebate and yield restriction regulations rather than from the form itself.
The first rebate installment must relate to a computation date no later than 5 years after the issue date, each later installment to a date no later than 5 years after the previous one, and each installment must bring cumulative payments, measured at future value as of the computation date, to at least 90 percent of the rebate amount as of that date (26 U.S.C. 148(f)(3); Treas. Reg. §1.148-3(f)(1)).
Every rebate payment is due no later than 60 days after the computation date to which it relates, and at the final computation date the payment must bring cumulative payments to 100 percent of the rebate amount (Treas. Reg. §1.148-3(f)(2), (g)).
What must be rebated and how computation dates are set is the subject of the rebate requirement, which a fixed-yield issuer can accelerate by choosing earlier computation dates, since a fixed-yield issue may treat any date as a computation date (Treas. Reg. §1.148-3(e)(1)).
Yield reduction payments ride the same schedule: Treas. Reg. §1.148-5(c)(2)(i) requires them on or before the required rebate installment dates, and for purpose investments nothing is due until the earlier of the end of the 10th bond year or 60 days after the issue is retired, with interim payments not required to exceed 75 percent of the amount otherwise payable (Treas. Reg. §1.148-5(c)(2)(ii)).
The 1.5 percent penalty in lieu of rebate, available to a construction issue that irrevocably elected it on or before the issue date, is due within 90 days after each 6-month spending period that misses the 2-year schedule, and the instructions call for a separate Form 8038-T for each 6-month period (26 U.S.C. 148(f)(4)(C)(vii); Treas. Reg. §1.148-7(k)).
Form 8038-T also carries the penalty paid to end that election, which under Treasury Regulation §1.148-7(l) is 3 percent of unspent proceeds times the years in the initial temporary period, with yield restriction and redemption also required to end it (26 U.S.C. 148(f)(4)(C)(viii); Treas. Reg. §1.148-7(l)).
| Payment | Filing deadline | Where the rule is |
|---|---|---|
| Rebate installment | Within 60 days after the computation date, first computation date no later than 5 years after issue | §1.148-3(f)(1), (g) |
| Final rebate payment | 100 percent of the rebate amount, within 60 days after the final computation date | §1.148-3(f)(2), (g) |
| Yield reduction payment | On or before the rebate installment dates; purpose investments have their own schedule | §1.148-5(c)(2)(i), (ii) |
| 1.5 percent penalty in lieu of rebate | Within 90 days after each 6-month period, separate form per period | 148(f)(4)(C)(vii); §1.148-7(k) |
What does Form 8038-T report?
The Rev. 10/2021 instructions say issuers of tax-exempt bonds and any other bonds subject to the provisions of section 148 must use Form 8038-T to make arbitrage rebate and related payments, and the form collects compliance detail alongside the money.
A separate form is used for each issue, and the same instructions route the form and check to the Internal Revenue Service Center, Ogden, UT 84201-0027, with the check payable to United States Treasury; IRS.gov/Form8038T carries any revision newer than Rev. 10/2021.
On the compliance side, line 26 asks about qualified administrative costs taken under the GIC and defeasance escrow rules, line 30 asks whether gross proceeds were invested in a guaranteed investment contract and, if so, the provider's name and the term of the GIC to the nearest tenth of a year, line 31 asks whether proceeds were invested beyond the temporary periods, and line 32 asks who prepared the calculations (Instructions for Form 8038-T, Part VI).
The provider and term reported on line 30 are the same details recorded in the closing documents kept in the issue's compliance file.
Line 31's question reaches the temporary periods under 26 U.S.C. 148(c)(1), under which a bond is not an arbitrage bond solely because proceeds are invested in higher yielding investments for a reasonable temporary period until they are needed, though rebate generally still applies to those earnings unless a rebate exception applies; the yield restriction page covers temporary periods in detail.
What are the penalties for a late or short payment?
A rebate payment that is late or short makes the bonds arbitrage bonds unless the failure was not due to willful neglect and the issuer promptly pays a penalty plus interest, at 50 percent of the amount for governmental bonds and qualified 501(c)(3) bonds and 100 percent for other bonds (26 U.S.C. 148(f)(7); Treas. Reg. §1.148-3(h)(1)-(3)).
Interest on the missed amount runs at the section 6621 underpayment rate.
The penalty is automatically waived if the missed amount plus interest is paid within 180 days after discovery of the failure, unless the Commissioner determines the failure was due to willful neglect or the issue is under examination during the specified window, a rule the IRS ties to Rev. Proc. 2005-40.
Whether those conditions hold in a particular case, including when the failure was discovered and whether the issue is under examination, is a question for bond counsel and tax counsel.
This is the work that written post-issuance compliance procedures are designed to keep ahead of: a calendar of computation dates, calculations started early enough to pay within the 60-day window, and a record of each filing.
What if the issuer overpays?
An issuer that overpaid rebate requests a refund on Form 8038-R no later than 2 years after the final computation date for the issue, and an overpayment under five thousand dollars generally cannot be recovered before that date (Treas. Reg. §1.148-3(i)).
Proposed regulations published on March 12, 2026 would clarify the time and manner for requesting refunds of overpayments; as of October 2026 the proposal is pending, and the existing regulation governs.
How does Form 8038-T relate to Form 8038 and Form 8038-G?
Form 8038-G is filed after issuance, Form 8038 covers private activity bonds, and Form 8038-T is the payment form that follows the issue through its life.
Form 8038-G is filed on or before the 15th day of the 2nd calendar month after the close of the calendar quarter in which the bond is issued, separately for each governmental issue with an issue price of one hundred thousand dollars or more, and smaller issues use Form 8038-GC (Instructions for Form 8038-G).
Both forms ask about GICs: Form 8038-G line 36 asks for the gross proceeds invested in a GIC, the GIC's final maturity and the provider's name, and Form 8038-T line 30 asks whether gross proceeds were invested in a GIC and, if so, the provider and term.
Forms 8038-G and 8038 also ask about written procedures: Form 8038-G line 44 asks the issuer to check a box if it has established written procedures to monitor compliance with the arbitrage, yield restriction and rebate requirements of section 148, line 43 asks the same about written procedures for timely remedial action on nonqualified bonds, and Form 8038 for private activity bonds carries parallel questions (Instructions for Form 8038-G, Rev. 10/2021; Form 8038, Rev. 09/2025).
The two forms connect on the penalty election as well: Form 8038-G line 40 records a 1.5 percent penalty election made at issuance, and the penalty payments for each 6-month spending period that misses the schedule then land on Form 8038-T.
| Form | What it covers | Filing timing |
|---|---|---|
| 8038-G | Filed separately for each governmental issue with an issue price of at least one hundred thousand dollars | 15th day of the 2nd calendar month after the close of the issuance quarter |
| 8038-GC | For governmental issues below that threshold | Per the Form 8038-GC instructions |
| 8038 | For private activity bonds, with parallel procedures questions | Per the Form 8038 instructions |
| 8038-T | Payment form for rebate, yield reduction payments and related penalties | With each payment; rebate payments are due within 60 days after their computation dates |
Because the filings follow the issue's computation dates and spending periods, the calendar behind Form 8038-T is built from the same pieces as the investment itself: the draw schedule, the spending exceptions the issue uses, and the terms of the closed investment.
If the filing calendar and investment record on an issue need an independent look, mGIC can check your proceeds against the rules as part of a free, no-obligation reinvestment review, and a conversation starts at the contact page.
Which payments an issue owes, and when, are legal and tax determinations that belong to bond counsel and tax counsel.
Frequently asked questions
Is Form 8038-T an annual information return?
No. The instructions describe Form 8038-T as the form issuers use to make arbitrage rebate and related payments, and a separate form is filed for each issue. Filings follow each payment's due date rather than an annual calendar.
Is there relief for a rebate payment discovered late?
Treasury Regulation §1.148-3(h) automatically waives the 50 or 100 percent penalty if the missed amount plus interest is paid within 180 days after discovery of the failure, unless the Commissioner determines the failure was due to willful neglect or the issue is under examination during the specified window.
Is there late-filing relief for Form 8038-G?
The Form 8038-G instructions note that late filing relief is available under Rev. Proc. 2002-48. Form 8038-G itself is due by the 15th day of the second calendar month after the close of the quarter in which the bond is issued.
Does the procedures checkbox on Form 8038-G measure whether an issue meets section 148?
No. Line 44 asks the issuer to check a box if it has established written procedures to monitor compliance with the arbitrage, yield restriction and rebate requirements of section 148. The question asks whether procedures exist, which is different from calculating whether a payment is due.
Who prepares the calculations reported on Form 8038-T?
Line 32 of Form 8038-T asks who prepared the calculations. Which payments an issue owes, and when, are determinations for the issuer's bond counsel and tax counsel.
Sources
This page is general educational information about municipal finance and federal and state rules as of the date shown. It is not legal, tax or investment advice, and it is not a recommendation about any particular investment. Product availability, legality and suitability depend on the issuer, jurisdiction, governing documents and transaction-specific facts. Final legal and tax determinations remain with the issuer's bond counsel, tax counsel and other advisors.
