Tax-Exempt Commercial Paper

Tax-Exempt Commercial Paper

A short-term, unsecured loan issued by an organization that provides exemption from at least some taxes on its yield. Universities are the most common issuers of tax-exempt commercial papers; they do so with the permission of the government, which wants to help the universities fund their operations without directly injecting cash. Like other commercial papers, tax-exempt commercial papers are rarely for a term longer than a few months and they are usually issued at a discount. They are usually issued to cover short-term liabilities.