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N w -r s A r b i t r a g e Compliance Specialists Incorporated has the tools to guide you through unfamiliar terrain. What is Arbitrage? IRS Required Arbitrage Rebate Reports Experience Our CPAs and in-house tax attorney are the most experienced in the industry. They have been performing arbitrage rebate services since the inception of the law in the mid 1980s. Expertise Few other firms can match our resources and expertise. Our firm's only business is to provide you with high quality arbitrage rebate compliance services. We offer: • Rapid report turnaround • Report tracking system for your IRS deadlines • Versatility in handling small to large issues • Comprehensive accuracy testing and review • Significant IRS audit experience "Arbitrage" is the price differential, or spread earned, from investing inherently lower yielding tax-exempt debt proceeds in higher yielding taxable investments. There are 2 major areas of arbitrage compliance requirements that you must address for all tax-exempt debt: • Arbitrage Rebate • Yield Restriction/Reduction Interest ~~ro 6~ro 5% 4% 3% 2% i ~ro o~io 95 Should You Be Concerned With Arbitrage Rebate Rules? Yes, if you are involved with tax-exempt debt, you must comply with the mandatory IRS arbitrage regulations. Besides being required by law, non-compliance can result in the loss of tax-exempt status or significant IRS or SEC fines. IRS enforcement is increasing nationwide due to recent IRS initiatives to aggressively pursue negligent issuers. • Every 5 years, and • The final maturity date of the debt Our Recommendation for Arbitrage Rebate Reports For tax planning purposes you may want to consider doing interim rebate calculations in addition to the above IRS reporting requirements: • After the 1 st year of issuance, and • Annually thereafter if rebate liability, or wait until the 3rd year if no rebate liability Are There Ways to Keep Arbitrage? There are a number of exceptions under the IRS Regulations that enable you to keep the arbitrage on your tax-exempt issue: • Small Issuer Exception ~ 6-Month Spending Exception • 18-Month Spending Exception • 2-Year Spending Exception • Bona Fide Debt Service Fund Exclusion The requirements to meet these exceptions are complex and require expertise to ensure that all the requirements for the exemption are met. 96 97 98 99 00 O1 02 Year ^ Investment Yield ^ Debt Yield