tax-exempt bond

Tax-exempt bond

A bond usually issued by municipal, county, or state governments whose interest payments are not subject to federal and, in some cases, state and local income tax.

Tax-Exempt Bond

A bond issued by a local or state government. Municipal bonds are usually used to raise capital for improvements in infrastructure or other aspects of the municipality. For example, a city or school district may issue a tax-exempt bond to build a new school or a new playground. They are called tax-exempt bonds because they are exempt from federal income taxes and sometimes from state and local taxes as well. Tax-exempt bonds usually pay lower coupons than corporate bonds, but because the yield is tax-free, the after-tax basis may be higher for the tax-exempt bond. Risk varies according to the municipality and the particular type of bond.

tax-exempt bond

References in periodicals archive ?
Real estate finance company, Red Stone Partners, has unveiled a $250 Million Tax-Exempt Bond Fund.
The acquisition received tax-exempt bond financing provided through the New York City Housing Development Corporation (HDC).
This became an even larger problem with the advent of tax-exempt bond mutual funds holding an increasing proportion of tax-exempt bonds in the market.
In 1991 the Industrial Development Board of Nashville (IDB) and the Metropolitan Government of Nashville (Metro) approved a $15 million tax-exempt bond issue for David Lipscomb University, a liberal-arts institution affiliated with the Churches of Christ.
The city has held similar public hearings and tax-exempt bond approvals in the past, including one for the YMCA in 1993, the Bouquet Canyon Seniors Housing project in 1997 and two in 2000, for the Child and Family Center and Henry Mayo Newhall Memorial Hospital.
In addition, tax-exempt bond financing for a not-for-profit organization usually requires that an amount of cash equal to approximately one year's total debt service payments.
We then assisted Fairview in floating a $52 million tax-exempt bond issue to fund the development of the project.
If it were an airport, a toll road, or a water system serving the public (as opposed to simply a few private users), it would qualify for tax-exempt bond financing.
For example, in January you could purchase a tax-exempt bond or fund yielding 5.
Under section 141(b)(1) of the Internal Revenue Code (IRC), no more than 10 percent of tax-exempt bond proceeds (5 percent for tax-exempt entities) may be applied to any "private business use," which is defined to mean use (directly or indirectly) in a trade or business carried on by any private party.
If the taxpayer is in the 28% marginal tax bracket, multiplying the interest rate of the taxable bond by 72% will make it comparable with the tax-exempt bond.