Navigating Arbitrage Compliance Together: ACS at Industry Conferences
Participating in a variety of local, regional, and national conferences keeps us at the forefront of industry trends and best practices. This broader perspective allows us to identify innovative solutions and tailor our services to address the specific arbitrage compliance challenges facing your organization.
We encourage you to visit our booth or schedule a meeting directly with us during the following conferences! We look forward to seeing you there.
Look for ACS at These Conferences
GFOA’s 120th Annual Conference
Government Finance Officers Association
June 28th – July 1st, 2026
Chicago, IL
FAQs
What is Arbitrage Rebate?
Arbitrage is earned when proceeds of a tax-exempt or tax-advantaged bond issue are invested above the bond yield, the average yield issuers pay to their bondholders. At its most basic level, this liability to the U.S. Treasury is the excess earnings received from investments when the average rate of return is above the bond yield.
What is Yield Restriction?
Yield restriction limits the earnings on certain municipal bond proceeds to prevent excessive arbitrage profits. If funds remain unspent beyond allowed periods, they must be invested at or below the bond yield or adjusted through payments to the IRS to maintain tax-exempt status. To learn more about yield restriction, please visit our blog.
What steps should I take to adhere to Arbitrage Rebate and Yield Restriction Rules?
Keeping quality records is critical to staying in compliance. The IRS requires that issuers maintain a daily transaction detail. Funds invested in established bank accounts will easily satisfy this requirement. Issuers maintaining records separately, on the other hand, should equip data with a running balance that captures deposits, expenditures, and interest earnings by date. Issuers ought to be mindful of IRS-required reporting deadlines upon each new bond issuance.
Arbitrage and yield restriction liabilities must be computed at least once every five years from the date of issuance, as well as on the issue’s final maturity date. Arbitrage earnings and yield reduction payments must be paid, or “rebated”, to the United States Treasury within 60 days of each reporting date. Preparation is key. We recommend annual reporting to all of our clients. Completing annual reports has the advantage of allowing the issuer to encumber liabilities in their books and records before a payment is due.
Should I be aware of any exemptions from the rebate requirement?
Yes! There are two major exceptions to arbitrage rebate that every issuer should know: the small- issuer exception and the spending exception. As you may have guessed, the small issuer exception to rebate is based on the size of your debt issuances. Governmental issuers expecting to issue less than $5 million of tax-exempt bonds in a calendar year may be exempt from the rebate requirements. This threshold increases to $15 million for bonds issued to build public schools.
The spending exception to rebate is available to issuers meeting certain time thresholds for expending bond proceeds.
The three spending exceptions are the:
1. 6-month spending exception
2. 18-month spending exception and
3. 2-year spending exception
If the proceeds of an issue are invested above the bond yield, meeting a spending exception allows the issuer to keep all of its interest earnings. Who doesn’t love a little extra spending money?
Contact us
One of our expert analysts will be happy to contact you about your bond compliance needs.