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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved