Tax-Exempt Commercial Paper

Tax-Exempt Commercial Paper

An unsecured short-term loan, usually issued to finance short-term liabilities, that provides the debtholders (bondholders) some level of tax preference on the earnings from their debt investment at a local, state or federal level, or a combination thereof.

Notes:

Universities often issue tax-exempt commercial papers to finance their operations with the help of the government. Governments help universities finance their operations because it is beneficial for the population to have post-secondary education. Though governments do not necessarily provide the universities with cash injections, they allow them to issue commercial papers that can earn tax-exempt gains for the people who buy the commercial papers.

See also: Accounts payable, Accounts receivable, Commercial paper, Interest rate