Chap8Notes - Municipal(Tax-exempt Securities and Markets...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Municipal (Tax-exempt) Securities and Markets States, municipalities, and counties raise capital that they need by issuing debt securities. Such securities tend to have a special tax status: Interest income is exempt from federal, state and where applicable, city taxes. Interest income on these bonds is, however, is taxable at The state level if the issuer is out-of-state. For residents of the issuing municipality, there is also tax exemption at the local level. Capital gains/losses may still be subject to the normal taxation rules that are applicable. Tax-Exempt Securities Not every “Muni” however qualifies for this tax exemption Private-activity bonds don’t qualify for special tax-exempt status, unless they are defined as qualified private- activity bonds . (e.g. airports or student loans) An issue is a Private-activity bonds if 10% or more of the issues proceeds are used by private entities, and 10% or more of the proceeds are secured by the property used in the private entity’s activity. Types of Municipal Debt General Obligation Bond (GO): Security that is backed by the credit and taxation powers of the issuer. b States, counties, special districts, cities and school districts. State level: Taxes include income taxes, sales taxes, and excise taxes. County and City level: property taxes. The tax base of the issuing entity and its ability in levying taxes are important factors in determining the pricing of GO bonds.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
2 Types of Municipal Debt -- Continued Revenue Bond: Securities issued to fund specific projects or securities that are protected by the pledge of net revenues from specific projects financed.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 5

Chap8Notes - Municipal(Tax-exempt Securities and Markets...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online