rp-08-37.pdf

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Part III

Administrative, Procedural, and Miscellaneous

26 CFR 601.601: Rules and regulations
(Also Part I, §§ 103; 148; 1.148-3, 1.148-13T)

Claims for Recovery of Overpayments of Arbitrage Rebate and Similar Payments
on Tax-exempt Bonds

Rev. Proc. 2008-37

SECTION 1. PURPOSE
In general, this revenue procedure provides guidance to issuers of tax-
exempt bonds regarding the terms and procedures for claims for recovery of
overpayments under § 1.148-3(i) of the Income Tax Regulations of amounts paid
to the United States with respect to the arbitrage rebate requirement under
§ 148(f) of the Internal Revenue Code, the penalty in lieu of rebate provisions
under § 148(f)(4)(C)(vii) and (viii), or the yield reduction payment provision under
§ 1.148-5(c) for purposes of the arbitrage investment restrictions generally under
§ 148. This revenue procedure also establishes a deadline for claims for these
recoveries of overpayments which requires that issuers file these claims by no
later than the date that is two years after the final computation date with respect
to the applicable issue of bonds under § 1.148-3(e)(2), or two years from July 1,
2008, for an issue of bonds whose final computation date is on or before June
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24, 2008. Further, this revenue procedure provides that claims for recovery of
overpayments of rebate or penalty in lieu of rebate with respect to bonds that are
subject to § 1.148-13T of the temporary Income Tax Regulations published in the
Federal Register on May 18, 1992 (57 Fed. Reg. 20971) (the 1992 regulations
)
will be treated in the same manner as claims for recovery of overpayments made
under § 1.148-3(i).
SECTION 2. BACKGROUND
.01 Under § 103(a) and (b)(2), the exclusion from gross income of interest on
any State or local bond does not apply to interest on an arbitrage bond within the
meaning of § 148.
.02 Section 148(f)(1) generally provides that a bond that is part of an issue
shall be treated as an arbitrage bond unless the issuer pays to the United States
the arbitrage rebate amounts described in § 148(f)(2) for the issue (rebate
) in
accordance with § 148(f)(3).
.03 Section 148(f)(3) provides, in part, that, except to the extent provided by
the Secretary, rebate must be paid in installments that are made at least once
every five years. The last installment must be made no later than 60 days after
the day on which the last bond of the issue is discharged.
.04 Sections 148(f)(4)(C)(vii) and (viii) permit issuers of certain construction
issues to elect to pay a penalty in lieu of rebate (penalty
) in the manner and
amount described in § 148(f)(4)(C)(vii) and (viii).
.05 Section 1.148-5(c)(1) permits issuers to pay yield reduction payments
that may be taken into account in determining the yield on an issue for arbitrage
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purposes under § 148 (yield reduction
) in the circumstances and manner
described in § 1.148-5(c).
.06 Section 1.148-13T of the 1992 regulations provides rules for recovering
an overpayment of rebate or penalty in lieu of rebate with respect to certain
bonds issued before July 1, 1993. Under § 1.148-13T(a) and (c)(1) of the 1992
regulations, an issuer may recover an overpayment of rebate or penalty to the
extent that recovery on the date requested would not result in an additional
rebate amount as of the date requested if the issuer proves to the satisfaction of
the Commissioner that the overpayment occurred and was paid as a result of a
mistake.
.07 Section 1.148-3(i)(1) provides that, in general, an issuer may recover an
overpayment of rebate by establishing to the satisfaction of the Commissioner
that the overpayment occurred. An overpayment is the excess of the amount
paid over the sum of the “rebate amount” (as defined in § 1.148-3(b)), as of the
most recent “computation date” (as defined in § 1.148-3(e)) and all amounts that
are otherwise required to be paid under § 148 as of the date the recovery is
requested.
.08 In general, overpayments of penalty and yield reduction are treated in the
same manner as overpayments of rebate. See generally §§ 1.148-3(i)(1), 1.148-
7(k)(3), and 1.148-5(c)(1) and (2).
.09 In Rev. Proc. 92-83, 1992-2 C.B. 487, the Internal Revenue Service (the
Service
) sets forth procedures for claims for recovery of overpayments of rebate.
.10 In Announcement 2001-115, 2001-2 C.B. 539, the Service announced
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that Form 8038-R, Request for Recovery of Overpayments Under Arbitrage
Rebate Provisions, replaces the procedures set forth in Rev. Proc. 92-83.
.11 Under 26 U.S.C. § 7422, in general, a civil action may not be commenced
against the United States to recover any internal revenue tax, any applicable
penalty or “any sum alleged to have been excessive or in any manner wrongly
collected” until a claim for refund has been duly filed according to the provisions
of law in that regard. The Service has determined that this provision applies to
claims with respect to overpayments of rebate, penalty, and yield reduction
because the amount of any such overpayment is covered within the “any sum”
language of § 7422. Cf. United States v. Clintwood Elkhorn Mining Co., 128 S.
Ct. 1511 (2008).
SECTION 3. PROCEDURE FOR FILING CLAIMS FOR RECOVERY OF
OVERPAYMENT OF REBATE, PENALTY, AND YIELD REDUCTION
.01 Form 8038-R
. This section sets forth terms and procedures for filing
claims for recovery of an overpayment of rebate, penalty, or yield reduction with
respect to an issue (an overpayment amount
). In order to receive any recovery
of an overpayment amount, an issuer must duly file a claim for recovery of an
overpayment amount (a refund claim) on the then-applicable form (form) and at
the then-applicable place of filing, as announced by the Service from time to
time. Presently, a refund claim shall be made by completing Form 8038-R and
filing the form and any attachments thereto with the Internal Revenue Service,
Ogden Submission Processing Center, Ogden, Utah, 84201 (Ogden Center
).
.02 Filing Deadline for Refund Claims on Overpayment Amounts
. Except as
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provided in section 6.02, the form for making a refund claim for an overpayment
amount must be filed by an issuer no later than the date that is two years after
the final computation date for the applicable issue of bonds under § 1.148-
3(e)(2).
.03 Processing a Refund Claim
. This section 3.03 describes the present
procedures that the Service will employ in processing refund claims on
overpayment amounts. These procedures may be refined or revised as
necessary, without affecting the issuer’s responsibilities under this revenue
procedure, by publication in the Internal Revenue Manual.
(1) The Ogden Center will determine whether the issuer has satisfied the
following initial processing requirements: (i) that the form has been completed
according to the instructions for the form and includes the required attachments;
(ii) that the issuer has previously submitted rebate, penalty, or yield reduction
payments accompanied by one or more Forms 8038-T (Arbitrage Rebate, Yield
Reduction and Penalty in Lieu of Arbitrage Rebate) with respect to the issue in
question; and (iii) the amount previously submitted as rebate, penalty, or yield
reduction payments is greater than or equal to the overpayment amounts stated
in the refund claim. If the initial processing requirements are satisfied, the Ogden
Center will promptly forward a copy of the refund claim to the Service’s Office of
Tax Exempt Bonds, Compliance and Program Management (TEB CPM
) for
further processing. If the Ogden Center concludes that the initial processing
requirements are not satisfied, the Ogden Center will notify the issuer by
telephone or letter (the Ogden Notification
) describing any requirements that
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have not been satisfied. If the issuer fails to file a supplement satisfying the initial
processing requirements within 45 days starting on the date of the Ogden
Notification, the Ogden Center will forward the refund claim to TEB CPM for
issuance of a Refund Claim Rejection letter. Any refiling must be within the
period for filing the form in section 3.02 of this procedure.
(2) TEB CPM will review the processing requirements and determine
whether an overpayment occurred and the amount of the overpayment that an
issuer may recover as follows:
(a) Refund Claim Approval
. If TEB CPM determines that the correct
amount of overpayment is equal to or greater than the overpayment amounts on
the refund claim, TEB CPM will notify the issuer in writing of the approval and
will authorize a refund for the entirety of the requested overpayment amounts.
(b) Refund Claim Rejection
. TEB CPM may reject a refund claim based
on an issuer’s failure to follow the procedures for refund claims set forth in
section 3.03(1) of this revenue procedure or an issuer’s failure to provide
sufficient information to enable TEB CPM to determine that an overpayment
occurred. The issuer may resubmit a refund claim in compliance with the initial
processing requirements provided that any such resubmission is made by the
filing deadlines set forth in sections 3.02 and 6.02 of this revenue procedure. A
refund claim that is rejected on the basis of a procedural deficiency or
incomplete information is not a Refund Claim Denial under section 3.03(2)(c) of
this revenue procedure.
(c) Refund Claim Denial
. Excluding rejections of refund claims for
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procedural deficiencies or incomplete information, as described in section
3.03(2)(b) of this revenue procedure, TEB CPM may deny a refund claim, in full
or in part, on the following grounds: (i) the correct amount of overpayment is less
than the requested overpayment amounts, or (ii) no overpayment occurred. If
TEB CPM makes a preliminary determination that a refund claim should be
denied, TEB CPM will notify the issuer in writing that it may submit additional
information to support the refund claim or participate in a conference or both.
Any additional information must be submitted within 21 days of the later of either
the notification to allow additional information in support of the refund claim or the
conference. If the issuer fails to submit additional information within the 21-day
period to support the refund claim to the satisfaction of TEB CPM, or TEB CPM
still disagrees that an overpayment occurred, TEB CPM will issue, by certified or
registered mail, a formal letter to the issuer stating that the refund claim is denied
(a Refund Claim Denial
), subject only to the issuer’s appeal right, as described in
section 3.04 of this revenue procedure. The Refund Claim Denial letter will
explain the reasons for the determination to deny the refund claim and inform the
issuer of its right to request from the Office of Appeals an administrative appeal
of the denial pursuant to Revenue Procedure 2006-40, 2006-42 I.R.B. 694, as
subsequently amended, supplemented, or superseded. If an appeal is not
requested within 30 days of the date of the Refund Claim Denial letter, then the
Refund Claim Denial becomes final, as of the date of issuance of the Refund
Claim Denial letter by certified or registered mail, and the issuer may not refile
the refund claim thereafter.
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.04 Appeals. An issuer is entitled to appeal a Refund Claim Denial to the
Office of Appeals pursuant to section 3.01 of Rev. Proc. 2006-40, as
subsequently amended, supplemented, or superseded.
SECTION 4. EFFECT ON OTHER DOCUMENTS
This revenue procedure obsoletes Rev. Proc. 92-83.
SECTION 5. AMENDMENT TO REGULATIONS
The Service and the Department of the Treasury expect to issue regulations
under § 148 and § 1.148-3(i) to provide that a claim for recovery of an
overpayment of rebate, penalty, or yield reduction must be filed with the
Commissioner by no later than two years after the final computation date of the
issue of bonds to which the refund claim relates.
SECTION 6. EFFECTIVE DATE
.01 In General
. Except as provided in Section 6.02, this revenue procedure
applies to refund claims arising from an issue of bonds for which the final
computation date is after June 24, 2008.
.02 Transition Rule
. For refund claims arising from an issue of bonds for
which the final computation date is on or before June 24, 2008 the two year
period in section 3.02 begins on July 1, 2008.
SECTION 7. PAPERWORK REDUCTION ACT
The collection of information contained in section 3 of this revenue procedure
has been previously reviewed and approved by the Office of Management and
Budget in accordance with the Paperwork Reduction Act (44 U.S.C. § 3507)
under control number 1545-1750.
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Books or records relating to a collection of information must be retained as
long as their contents may become material in the administration of any internal
revenue law. Generally, tax returns and tax return information are confidential as
required by 26 U.S.C. § 6103.
SECTION 8. DRAFTING INFORMATION
The principal authors of the revenue procedure are Christopher C. Woodin,
Tax Exempt Bonds, Compliance and Program Management, and Timothy L.
Jones, Office of Chief Counsel (Financial Institutions and Products), Internal
Revenue Service. For further information regarding this revenue procedure,
contact Mr. Woodin at 202-283-9780 or Mr. Jones at 202-622-3980 (not toll-free
numbers).