taxable municipal bond

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Taxable municipal bond

Taxed private-purpose bonds issued by the state or local government to finance prohibited projects such as sports stadiums.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Taxable Municipal Bond

A municipal bond in which a local government entity seeks to raise money for a private company with no obvious public benefit. The municipality issues a taxable municipal bond when it wishes to attract a business and the jobs it would bring to the area, especially when the business may be otherwise unable to obtain financing for the project. While this may benefit the area in the long term, the bond remains taxable unless then municipality can prove that a public benefit derives directly from the bond. Taxable municipal bonds generally are not guaranteed by the revenue of the municipality. See also: Private activity bonds.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

taxable municipal bond

A municipal bond in which interest paid to the bondholder does not qualify as tax-exempt for federal tax purposes because of the use to which the bond proceeds are put by the municipal borrower. Taxable municipal bonds were reissued in 1986, the first issue since 1913, because of limitations placed on municipal obligations by tax reform. Although taxable municipal bonds are subject to federal taxation, most are not subject to taxation by the state in which the municipal issuer is located. Taxable municipal bonds are generally more appropriate for pension funds and other tax-exempt investors than for individual investors.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
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Some of that interest may get financed in the form of taxable municipal bonds. That's an area where we're seeing interest in the U.S.
What is driving the growth in taxable municipal bonds?
That said, Stokes believes the bright spots for fixed-income in the coming year are going to come from the investor's ability to recognize stable to improving credits, which include corporate bonds, as well as bonds issued by government agencies, foreign governments, and taxable municipal bonds. "If we're in an environment with low yields to even potentially rising yields, that's not the best environment for fixed- income.
Taxable municipal bonds, bonds with floating rates, and derivatives are excluded from the index.
Next, we examine the relationship between municipal bond yields and state-level demand and supply for the subsample of states with no income tax and for a control sample of taxable municipal bonds. Given that these two submarkets are expected to exhibit a stronger degree of integration, we predict that the yields in these markets would be less sensitive to local demand and supply.
The Texas Transportation Commission sold nearly $1.5 billion in Build America Bonds in two tranches Monday, the largest sale of those taxable municipal bonds in more than a month.
Part of the American Recovery and Reinvestment Act, BABs are taxable municipal bonds carrying special tax credits and federal subsidies for municipal bond issuers.
Gore said that President Clinton would propose some $700 million over the next five years in new federal spending to leverage up to $10 billion in taxable municipal bonds, which he dubbed "Better America Bonds." Proceeds of the bonds issued by state, local, or tribal governments, after approval by the federal Environmental Protection Agency (EPA), would be to preserve green space, create or restore urban parks, protect water quality, and clean up brownfields.
Eventually, some of the small corporations that issue taxable municipal bonds will grow and want to take their company public.
According to the NAIC, from 2008 to 2012, life companies more than tripled their muni investments from $38 billion to $125 billion, driven by increased purchases of taxable municipal bonds. The largest increase in life holdings coincided with the Build America Bonds program, created as part of the American Recovery and Reinvestment Act that President Barack Obama signed into law Feb.