Arbitrage Rebate Services Overview


What is Arbitrage Rebate?


Arbitrage refers to the excess interest income that issuers may earn through investing tax-exempt bond proceeds in higher yielding taxable securities. Section 148 of the Internal Revenue Code of 1986, referred to as the Arbitrage Regulations, permits a tax-exempt issuer to earn arbitrage only in specified circumstances, and in most cases requires any arbitrage profit to be paid to the U.S. Treasury. The IRS requires that arbitrage calculations be completed no later than five years from the date of a bond’s issuance, every five years thereafter, and upon final maturity. Compliance with complex arbitrage rebate rules can divert the staff of tax-exempt bond issuers from important organizational responsibilities. Incorrect calculations can jeopardize the outcome of an IRS audit. By outsourcing these responsibilities to AMTEC, savings, efficiencies and confidence in an issuer’s tax compliance efforts are immediately realized. In addition, you’ll receive comprehensive and unlimited support from us in the event of an IRS audit.

Learn more about arbitrage rebate and the importance of taking an active approach to arbitrage calculations.

Free Tax-Exempt Bond Arbitrage Compliance Review


To initiate AMTEC’s free review of your bond issues (including recommendations for which debt issuances may or may not require arbitrage rebate / yield restriction calculations) contact Mike Scarfo, Senior Vice President, at 888-999-8038 or mscarfo@amteccorp.com.

Arbitrage and Yield Restriction Calculations


The AMTEC arbitrage rebate and yield restriction calculations process includes, but is not limited to, the following:

  • Determination of the quantitative value of a spending exception when one account has generated a rebate liability;
  • Providing the issuer with all schedules, results and projections for the issuer’s status regarding any qualification of a rebate spending exception;
  • A completed walk-through of how to proactively manage a potential rebate liability as well as full guidance and consultation for how, when and where to make the rebate payment;
  • Unlimited consultation for no additional fee with any other members of the issuer’s staff and/or any outside advisors with respect to the rebate calculation results;
  • Determination and testing of all ending balance valuation methodologies acceptable under the Arbitrage Regulations, in an effort to legally calculate the rebate at the issuer’s most advantageous method;
  • Safeguarding of all financial records for a period of six years after the final redemption date of each issue;
  • Assistance in the planning stages of new bond issues to discuss possible rebate exceptions, and the pro-forma testing of anticipated expenditures of proceeds for rebate exception purposes based on a variety of investment scenarios; and
  • Identification of any yield restrictions for all proceeds following the end of the Temporary Period. Based upon the classification and use for certain bond proceeds, there are multiple, specific yield restriction rules issuers must follow. AMTEC will review all funds and identify if they are subject to yield restriction and require a calculation. Furthermore, AMTEC will provide the issuer with an explanation of the reason for the yield restriction, the permissible rate of the yield restriction, and how to assure future compliance for the yield restricted funds PRIOR to preparing any yield restriction calculations.