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:
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:
*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.
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.
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:
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.
Despite appearing simple, Form 8038 presents real challenges for many issuers:
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.
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.
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.
Many issuers struggle with calculating or even understanding whether they owe a rebate. These calculations are complex, and mistakes can lead to penalties.
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.
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:
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.
Are you regularly tracking how bond-financed property is used?
Because use changes over time, your process should include:
Can you access the right records if the IRS comes knocking?
To stay compliant:
Are you tracking (and documenting) private business use annually?
Your private business use compliance process should include:
Tip: Include private use reviews in your year-end or audit readiness processes.
Are you staying on top of investment earnings and rebate deadlines?
Make sure your process covers:
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.
To file correctly, you'll need detailed bond information, usage data, and an understanding of compliance obligations.
Collect the official statement, closing binder, tax certificate, and records of bond proceeds usage.
Always visit IRS.gov for the latest version of Form 8038 and guidance.
Include your entity’s name, address, EIN, and type (ex., government, 501(c)(3)).
Document the bond issue: date, par amount, purpose, and refunding status.
Indicate whether rebate rules apply, disclose investment earnings, and calculate rebate if needed.
This section requires calculation of any private business use. Document leases, contracts, or other non-governmental use arrangements.
Answer compliance-related elections (ex. safe harbor use).
An authorized representative must sign to certify the form’s accuracy.
Mail it to the correct IRS office based on the instructions.
Keep it on file, along with supporting documents, in case of audit.
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:
Store spending details, usage notes, documents, and compliance records all in one place.
Log private business use by time, space, or revenue and receive alerts if you're nearing the IRS limit.
Share secure access with bond counsel, tax advisors, or auditors—no email chains needed.
Set alerts for deadlines, document reviews, and private business use thresholds. Quickly generate audit-ready reports when needed.
Create custom project workspaces tied to one or more bond series, including refinanced obligations, with linked funding sources and categories.
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:
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.