Rebate Payments
If bond proceeds were invested at a yield higher than the bond yield, the excess earnings must be paid to the U.S. government in five-year installments. This is true even if the issuer was allowed to invest the bond proceeds at a higher yield because of a yield restriction exception, such as the reserve fund or minor portion exceptions described above.
These payments to the government are called rebate payments. To determine the rebate payment, a municipality will typically perform a rebate calculation annually and excess amounts will be averaged over the five-year period. An arbitrage rebate payment is required to be paid no later than 60 days after the end of every fifth bond