tax anticipation note

Tax Anticipation Note

A municipal bond, usually with a maturity of less than one year, issued on the assumption that the debt will be paid back on future tax revenue. Municipalities issue tax anticipation notes to provide cash for immediate or time sensitive needs. For example, a city may issue a bond to pay for school construction rather than wait for tax revenues to pay for it because either the school is desperately needed or construction can only occur in certain times of the year when the city is cash poor. At maturity, tax anticipation notes are paid with tax revenues in the months following the issue.

tax anticipation note (TAN)

A short-term municipal obligation that is sold to provide funds for government operations until taxes have been received. At that time the receipts are used to repay the debt. These generally low-risk securities appeal primarily to larger investors.