502.3 IRS Requirements for Lease/Purchase Agreements
Each year, PSU is required to report to the IRS all leases entered into during the previous calendar year for which the institution may ultimately acquire an interest in the property. This can be either through a bargain purchase option or title transfer. For IRS reporting purposes, the PSU capitalization threshold of $5,000 does not apply. Financing agreements must have a stated interest rate and the cost of purchasing the asset should be less than the estimated economic value of the asset at the termination of the lease/purchase (Bargain Purchase Option.) Individual leases of less than $100,000 can be aggregated and reported on IRS Form 8038-GC "Informational Return for Small Tax-Exempt Governmental Bond Issues and Installment Sales." The filing deadline for this form is February 15th. Individual lease purchase agreements entered into during the year that equal or exceed $100,000 must be reported separately on IRS Form 8038-G "Information Return for Tax-Exempt Governmental Obligations." The reporting deadline for this form is on or before the 15th day of the 2nd calendar month after the close of the calendar quarter in which the lease is entered into. (I.e. If a qualifying lease is entered into on July 10th, it must be reported to the IRS by November 15th.)
For purposes of these IRS forms, the "entered into date" for a lease or installment purchase is defined as "the date interest starts to accrue."
See procedures manual for specific data to be reported and requested reporting format.