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What is arbitrage?  What are the rebate requirements for tax-exempt debt issues?

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The Arbitrage Rebate Practice

The Arbitrage Rebate Practice of The Arbitrage Group, Inc. provides its' clients with a full range of arbitrage rebate services. The members of the Arbitrage Rebate Practice have received specialized industry training, have extensive experience in the industry, have participated on numerous industry expert panel discussions (including the National Association of Bond Lawyers and state and national health-care and governmental industry groups), use the most modern computer technology to enhance service delivery capabilities, maintain a current working knowledge of the regulatory requirements, and are committed to delivering quality services to its' clients.

The goals of the Arbitrage Rebate Practice are to insure compliance with the Internal Revenue Code and the Income Tax Regulations in relation to the arbitrage rebate requirements as well as to maintain client satisfaction for each rebate engagement. The Arbitrage Rebate Practice represents a wide variety of clients throughout the nation. We have prepared rebate computations for bond issues such as municipal, airport and transportation, health care, higher education, water and wastewater, housing, sports facilities and convention centers, and school districts.

Our specialized training and experience enables us to handle a wide variety of complex arbitrage issues affecting a rebate calculation such as the allocation of commingled funds, transferred proceeds computations, yield restriction issues, late filing issues, and multipurpose issues. Each of our rebate reports includes our opinion, independent calculation of bond yield, calculation of the rebate amount which is the difference between the actual and allowable earnings on the bond proceeds, and a summary of the information and computational assumptions affecting the calculations.

Scope of Arbitrage Rebate Services

As members of The Arbitrage Group, Inc., the following services have been provided for thousands of engagements.

  1. Calculation of the rebate amount due to the Internal Revenue Service where funds received from the issuance of tax-exempt debt have been invested in non-purpose investments and arbitrage earnings have occurred

  2. Calculation of the bond yield for variable rate bond issues or fixed rate bond issues

  3. Calculation of the overall investment yield

  4. Preparation of IRS Form 8038-T with complete filing instructions

  5. Review of the closing documents associated with an issuance of tax-exempt debt to identify and advise client of the related arbitrage rebate requirements for the debt issuance

  6. Pre-issuance planning to insure arbitrage rebate requirements will be addressed on a timely basis and to insure maximization of allowable earnings

  7. Calculation of yield reduction payments required

  8. Calculation of the penalty in lieu of rebate amount where the issuer has made such an election

  9. Review of different acceptable methodologies of the Income Tax Regulations to minimize the rebate liability of our clients

  10. Review of all issues for potential exceptions to the rebate requirements the tax-exempt debt issuance may qualify for, such as the 6-month spending exception, 18-month spending exceptions, 24-month spending exception, small issuer exception, exception for investments in tax-exempt securities, and or the bona fide debt service fund exception

  11. Review of commingled funds, refunding issues, and transferred proceeds

  12. Where an overpayment of rebate has occurred, the calculation of the overpayment amount and the completion of all filing forms along with the respective filing instructions

  13. Advise clients on opportunities to maximize earnings

  14. Maintenance of a "tickler system" to advise client of upcoming required computation dates

  15. Ongoing consultation of the rebate requirements of the bond issue and current developments affecting arbitrage rebate

The Arbitrage Rebate Practice is managed by H. Troy Merrill, Joe L. Aviles and Gregory A. Ichel. We offer quality services with a personal touch at very competitive rates. Please contact us to request a complimentary fee quote or to answer questions you may have.  Generally, all that is needed and most useful for a fee quote is the initial IRS Form 8038.


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