06 Aug 2024
All About Tax-Exempt Muni-Bonds
A common way for states and localities to supply needed capital facilities, such as buildings, roads, and libraries, is to finance them. Instead of competing with nongovernmental borrowers, most choose to use a special governmental advantage, issuing bonds whose interest payments are exempt from federal income tax. The tax code, under I.R.C. § 103(a), allows interest income paid to the owner of a tax-exempt security (i.e., a state or local bond) to be excluded from the owner's income when determining gross income for federal income tax purposes.
Related Content
- Municipal Debt Offerings: General Obligation Bonds and Revenue Bonds
Review the basics of municipal bonds—that is, bonds issued by municipalities (e.g., political subdivisions including cities, counties, states, their agencies and special districts, and U.S. territories and possessions) and certain 501(c)(3) nonprofit organizations under the tax code. This practice note discusses features of general obligation bonds and revenue bonds, and reviews the basic features and conditions of tax-exempt debt.
- Municipal Bond Offering Key Documents
Learn more about the key documents in a municipal bond offering. These documents differ from those of a commercial debt transaction in two important respects. First, the lien of bondholders in the security for the bonds may be created more simply than the security for a lender in a commercial debt transaction. Second, a public offering of bonds will include documents that are not present in a commercial debt transaction.
Practical Guidance Updates
Featuring the latest updates from your Practical Guidance account.
- Tax Key Legal Developments Tracker (Federal)—keep up to date with key legal developments!
- Business Entities. Treasury and IRS release final regulations under R.C. § 367(b) providing guidance on the taxation of cross-border triangular reorganizations and related transactions. The regulations finalized, without substantive change, proposed regulations published on October 6, 2023. 89 Fed. Reg. 58275 (July 18, 2024).
- Employment. IRS provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under R.C. § 417(e)(3), and the 24-month average segment rates under I.R.C. § 430(h)(2), and also on the interest rate on 30-year Treasury securities under I.R.C. § 417(e)(3)(A)(ii)(II)as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under I.R.C. § 431(c)(6)(E)(ii)(I). I.R.S. Notice 2024-59.
- Inflation Reduction Act: Tax Provisions Tracker—keep up to date with key legal developments regarding the Inflation Reduction Act of 2022.
- Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts.
- For Practical Guidance content on important recent trends, review these easy-to-use Resource Kits on a variety of emerging topics:
- Chevron Reversal Impact Resource Kit
- Generative Artificial Intelligence (AI) Resource Kit
- Environmental, Social, and Governance (ESG) Resource Kit
- Public Interest, Pro Bono, and Non-Profit Resource Kit
- Review this guidance, AI and Legal Ethics: What Lawyers Need to Know, in the Summer Edition of the Practical Guidance Journal. Explore insights from a judge into the use of GenAI in civil litigation, including discovery issues, use cases, and key takeaways. Also advance your career with professional and business development guidance.
- Learn about the 2000+ leading attorney authors contributing to our 26 practice areas in the Practical Guidance Author Center. Interested in becoming a Practical Guidance author? Click here for details. Practical Guidance is committed to amplifying diverse voices of attorneys across all differences, including gender and race.
- Legal Developments provide the latest updates and analyses of emerging topics impacting your practice area. Visit the Legal Developments page to see the latest topics, which also include breaking legal news and related Practical Guidance content.
- New and Recently Updated Practical Guidance Content
- Low-Income Communities Bonus Credit Program for Energy Investment Credit
- Conservation Easements, Donor Advised Funds, and Sponsoring Organizations: Governing Principles
- Income Taxation of Annuities
- Proposed Regulations Require Brokers to Report Digital Asset Sales and Exchanges
- Section 367(b) Proposed Regulations on Triangular Reorganizations and Inbound Nonrecognition Transactions
- Tax and Estate Planning for Closely Held Business Interests
- Top Federal Tax Cases Of 2024: Midyear Report
PRACTICAL GUIDANCE CUSTOMER EMAIL EDITION ON THE WEB
Experience results today with practical guidance, legal research, and data-driven insights—all in one place.
Experience Lexis+