Sequestration Reduction Rate Announced for 2014

On Monday, September 30, 2013, the Internal Revenue Service announced that refund payments to state and local governments that have issued certain tax-advantaged bonds are subject to sequestration for fiscal year 2014.  Refund payments processed on or after October 1, 2013 through September 30, 2014, will be reduced by 7.2%.  This is a lower percentage reduction than the 8.7% that has applied to payments since sequestration first went into effect on March 1, 2013.

These reductions apply to Build America Bonds (BABs), Qualified School Construction Bonds (QSCBs), Qualified Zone Academy Bonds (QZABs), New Clean Renewable Energy Bonds (New CREBs), and Qualified Energy Conservation Bonds (QECBs) for which the issuer elected to receive a direct credit subsidy.

Issuers should apply for the full amount of the payments by completing Form 8038-CP in the manner provided by the Form 8038-CP Instructions. The IRS will notify issuers that a portion of their requested payment was subject to the sequester reduction.

Unless the Congress takes action, the sequestration reduction will continue through and including fiscal year 2021.