Municipal market participants pressing the Internal Revenue Service to pay interest on arbitrage rebate overpayments may have to turn to Congress because the IRS appears to lack the statutory authority to make such interest payments, a Treasury Department official said yesterday during a public hearing on proposed arbitrage rules.

“We are certainly sympathetic to the view that it seems unfair that the government charges interest to taxpayers, but doesn’t pay interest,” said John J. Cross 3d, an attorney with Treasury’s office of tax policy, during the 30-minute hearing on the proposed rules, which were unveiled in September. “But at the same time, to be fair to the government on this point ... the Treasury Department and the [Internal Revenue Service] are concerned about whether the IRS has the authority [to pay interest on] these rebate overpayments.”

Subscribe Now

Independent and authoritative analysis and perspective for the bond buying industry.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.