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.
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.