A revised IRS Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds, will become effective in January 2022 and will replace the current January 2020 version. The revised Form 8038-CP was released on October 20, 2021, and contains a wide range of substantive changes.
Notably, a separate Form 8038-CP is required for each type of bond (e.g., recovery zone economic development bonds, build America bonds, and each type of specified bond) and each interest rate structure (i.e., fixed or variable rate) in an issuance. A report number will correspond to each separate Form 8038-CP and should be used for subsequent yearly filings. Multiple maturities for specified bonds will be included in and captured by a new Schedule A. This is a departure from the current process that requires a Form 8038-CP for each maturity.
The new Schedule A, Specified Tax Credit Bonds Interest Limit Computation, will be used to calculate interest payable to bondholders for specified tax credit bonds (i.e., new clean renewable energy bonds (CREBs), qualified energy conservation bonds (QECBs), qualified zone academy bonds (QZABs), and qualified school construction bonds (QSCBs)). The schedule accounts for each maturity of bonds outstanding on the interest payment date.
Another change in the form requires an explanation for a net increase or net decrease to previous credit payments—the revised instructions provide five preset explanations from which to choose. The revised instructions also contain a new section for how and when to file an amended return, which states that amended returns can only be used to correct errors in Part III of a previously filed final return (rather than Parts I and II); new instruction designating the issuer as the primary contact for correspondence with the IRS (previously the IRS might contact the issuer or the entity receiving payment); a requirement not to round to whole numbers; and, in anticipation of electronic filing becoming available in 2022, new instructions for filing by paper and filing electronically, which require PDF attachments not to be password protected or encrypted when filed.
In a recent webinar held by the IRS on November 16 and 17, 2021, IRS personnel noted that filers should continue to use the current form (revised 2020) for any filings expected to be received by the IRS in 2021. The new form should only be used if the IRS is expected to receive the filing in 2022. For example, if the form is mailed on December 1, 2021, it is expected that the IRS will receive the filing before 2022, so the current form (revised 2020) should be used; however, if the form is mailed on December 31, 2021, it likely will be received by the IRS in 2022, and the new form should be used.
In contrast to the revision of Form 8038-CP, earlier this year several forms were revised, effective October 2021, without any substantive changes, including: Form 8038, Information Return for Tax-Exempt Private Activity Bond Issues; Form 8038-G, Information Return for Tax-Exempt Governmental Bonds; and Form 8038-GC, Information Return for Small Tax-Exempt Governmental Bond Issues, Leases, and Installment Sales.
If you have any questions about the content of this alert, please contact Sharon Brown, Public Finance Practice Area co-chair, at slbrown@barclaydamon.com; Carolyn Trespasz, associate, at ctrespasz@barclaydamon.com; or another member of the firm’s Public Finance Practice Area.