If you're completing IRS Form 8038 and wondering what "Do you have written post-issuance tax compliance policies and procedures?" really means, or whether you can confidently check “yes”, you’re not alone.
It may sound straightforward, but answering truthfully requires more than just good intentions.
This guide will help you understand what post-issuance tax compliance is, why it matters, how to fill out IRS Form 8038 step-by-step, and how to stay compliant throughout the life of your bonds, especially when it comes to private business use and arbitrage rebate.
Quick Summary:
- IRS Form 8038 reports tax-exempt bond issuances to the IRS.
- Post-issuance tax compliance is an ongoing process to ensure continued use of bond proceeds in accordance with federal tax laws.
- Having written procedures is essential, not just for checking “yes” on the form, but for maintaining tax-exempt status.
- Common issues include poor documentation, unclear rebate obligations, and failing to monitor private use.
- Tools like DebtBook help simplify and automate compliance, keeping your organization audit-ready.
What is Post-Issuance Tax Compliance & Why Does it Matter?
When a government or nonprofit issues tax-exempt bonds, it’s making a long-term commitment to the IRS: that the proceeds will be used in compliance with federal tax law.
Post-issuance tax compliance is the process of making sure your organization continues to meet those requirements after the bond closes and often for decades.
This includes:
- Monitoring how the bond proceeds are spent
- Tracking how bond-financed assets are used over time
- Managing private business use*
- Calculating and submitting arbitrage rebate payments
- Maintaining long-term documentation
*The IRS limits how much private business use is allowed and those limits apply over a specific measurement period. Calculating this timeframe is critical to maintaining compliance. Our Measurement Period Calculator makes it easy to track private use confidently and stay audit-ready.
What is IRS Form 8038?
IRS Form 8038 is used by issuers to report certain types of tax-advantaged bonds, such as tax-exempt governmental bonds or private activity bonds.
One critical question asks whether the issuer has written procedures in place to ensure post-issuance compliance. Checking that box without a robust program in place could lead to audit risk and potential tax consequences.
What is Private Business Use in Bond Compliance?
Private business use is one of the most important areas of post-issuance compliance. It refers to when a non-governmental entity, like a for-profit business or private nonprofit, uses any portion of a bond-financed asset.
Some examples include:
- Leasing space in a bond-financed building
- Naming rights agreements
- Management contracts
- Research partnerships
Even minor or incidental uses may count toward the IRS's private use limit, which is generally 10%. Exceeding that limit without proper structuring or remedial action can jeopardize the bond’s tax-exempt status.
What are the Common Mistakes on IRS Form 8038?
Despite appearing simple, Form 8038 presents real challenges for many issuers:
1. Lack of Written Policies and Procedures
Many issuers have informal compliance practices, but the form explicitly asks if these procedures are written. If you can’t produce a formal document, checking “yes” could raise red flags during an audit.
2. Difficulty Tracking Asset Use Over Time
Facilities change and project use evolves. Without structured tracking, it’s easy to lose sight of how bond-financed property is being used, especially when private business use is involved.
3. Incomplete or Disorganized Records
You’re expected to retain records for years after the bonds mature, but turnover and paper-based processes often lead to gaps. If you can't prove compliance, even good practices may not be defensible.
4. Uncertainty About Arbitrage Rebate Rules
Many issuers struggle with calculating or even understanding whether they owe a rebate. These calculations are complex, and mistakes can lead to penalties.
IRS Form 8038 Post-Issuance Compliance Checklist
Not sure if your organization is truly prepared to answer “yes” on IRS Form 8038? Use this checklist to assess whether your post-issuance compliance program is complete and audit-ready.
1. Written Policies and Procedures
Do you have a formal, written compliance plan?
This should be more than informal processes—it’s your official map for managing compliance long after the bond closes.
Your written procedures should include:
- Defined roles and responsibilities: Who does what, and when?
- Monitoring and review process: How you’ll regularly assess compliance.
- Standard operating procedures: A consistent, repeatable approach.
Tip: The IRS specifically looks for written policies in an audit. If you don’t have them, that checkbox on the 8038 form becomes risky.
2. Ongoing Monitoring of Bond-Financed Assets
Are you regularly tracking how bond-financed property is used?
Because use changes over time, your process should include:
- Asset usage logs: Know what’s being used, and by whom.
- Triggers for change: Flag new leases, partnerships, or renovations that may affect compliance.
- Annual updates: Review usage at least once per year, especially before audit prep.
3. Strong Record Retention Practices
Can you access the right records if the IRS comes knocking?
To stay compliant:
- Retain documents: Keep closing binders, rebate reports, and correspondence.
- Follow retention timelines: Maintain files for at least 3 years after final bond maturity.
- Go digital: Use a centralized, searchable system to store and manage your records. It saves time (and headaches) later.
4. Private Business Use Monitoring
Are you tracking (and documenting) private business use annually?
Your private business use compliance process should include:
- Annual reviews of asset use: Spot any non-governmental use early.
- Tracking even small agreements: Naming rights, management contracts, and short-term leases count.
- Documenting private use findings: Log any instances of private business use and note corrective action.
Tip: Include private use reviews in your year-end or audit readiness processes.
Download our Free Private Business Use Measurement Calculator
5. Arbitrage Rebate Compliance
Are you staying on top of investment earnings and rebate deadlines?
Make sure your process covers:
- Tracking investment income: Monitor returns on bond proceeds.
- Running rebate calculations: Check your bond documents as these are typically due every 5 years.
- Submitting timely payments: Send any owed rebates to the IRS.
- Hiring help if needed: Arbitrage rules are complex; third-party experts can help reduce risk.
Now that you know how to assess whether your post-issuance compliance program is complete and audit-ready, let’s move onto the steps for filling out IRS Form 8038.
How Do You Fill Out IRS Form 8038? (Step-by-Step)
To file correctly, you'll need detailed bond information, usage data, and an understanding of compliance obligations.
Step 1: Gather Key Information
Collect the official statement, closing binder, tax certificate, and records of bond proceeds usage.
Step 2: Download the Form & Instructions
Always visit IRS.gov for the latest version of Form 8038 and guidance.
Step 3: Complete Part I – Identification of Issuer
Include your entity’s name, address, EIN, and type (ex., government, 501(c)(3)).
Step 4: Complete Part II – Issue Information
Document the bond issue: date, par amount, purpose, and refunding status.
Step 5: Complete Part III – Arbitrage Information
Indicate whether rebate rules apply, disclose investment earnings, and calculate rebate if needed.
Step 6: Complete Part IV – Use of Proceeds & Private Business Use
This section requires calculation of any private business use. Document leases, contracts, or other non-governmental use arrangements.
Step 7: Complete Part V – Additional Questions
Answer compliance-related elections (ex. safe harbor use).
Step 8: Certify & Sign
An authorized representative must sign to certify the form’s accuracy.
Step 9: Submit the Form
Mail it to the correct IRS office based on the instructions.
Step 10: Retain a Copy
Keep it on file, along with supporting documents, in case of audit.
How DebtBook Helps You Manage Post-Issuance Compliance
Staying compliant with IRS rules including private business use, record-keeping, and arbitrage, requires a consistent, structured approach. That’s where DebtBook’s Debt Management solution comes in.
In DebtBook’s Debt Management solution, the Bond Proceeds Management feature helps you:
Centralize Your Project Data
Store spending details, usage notes, documents, and compliance records all in one place.
Track Private Business Use Automatically
Log private business use by time, space, or revenue and receive alerts if you're nearing the IRS limit.
Collaborate with Internal & External Teams
Share secure access with bond counsel, tax advisors, or auditors—no email chains needed.
Stay Ahead with Alerts & Reports
Set alerts for deadlines, document reviews, and private business use thresholds. Quickly generate audit-ready reports when needed.
Manage Complex Projects Easily
Create custom project workspaces tied to one or more bond series, including refinanced obligations, with linked funding sources and categories.
Why Getting IRS Form 8038 Right Matters
If you’re hesitating to check “yes” on Form 8038, it’s a sign that your current process may need reinforcement. But you’re not alone, and the good news is that the solution isn’t complicated. It’s all about consistency.
When you build a formal, documented post-issuance compliance program, and use tools like DebtBook to streamline the process, you can:
- Protect the tax-exempt status of your bonds
- Avoid audit exposure and penalties
- Create clarity for future team members or external reviewers
Related Debt Management Reading
- Key Rules & Risk Areas for Private Business Use Compliance
- Private Business Use Calculator: How to Determine the Measurement Period of Bond Financed Property
- Bond Financed Project: A Decision-Making Guide for Common Third-Party Agreements
Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, which means we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.
