Public-purpose bond

Public-purpose bond

A specific type of municipal bond used to finance public projects such as roads or government buildings. Interest on municipal bonds is federal income tax-free.

Public-Purpose Bond

A municipal bond that is issued in order to finance public works. For example, a city may issue a public purpose bond to build a road or school, which improves the city but does not directly attract private investment. The federal government does not tax the interest on a public-purpose bond. This exemption occurs automatically, unlike a private purpose bond, which must prove that it benefits the public in some way to qualify for the tax exemption.
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