"Arbitrage Rebate--Federal Tax Compliance for Issues of Tax-Exempt Bonds".

• Author: Douglas, Jennifer Ritter
• Position: Brief Article

Kramer, Jeffrey G.

The Bottom Line, Volume 17, Number 1, 1999, pp. 35-39.

This article describes the highly technical process of arbitrage rebate for tax-exempt bonds. Federal tax law requires issuers to rebate earnings on investments from bond proceeds that are in excess of the bond's yield to the federal government. To do that, issuers must first calculate the yield on the bond issue for arbitrage purposes. The computation of the yield can vary, but it is generally the discount rate that produces an amount equal to the present value of the issue price determined on the basis of the initial price. After the yield is computed...