Series 50: By Taxable Status

By Taxable Status

The Tax Reform Act of 1986 placed severe restrictions on qualifying for tax exempt financing. The government would no longer subsidize activities that do not provide a significant benefit to the general public. Taxable municipal bonds were created to fund private activities that would no longer qualify for exemption from federal taxes. These are known as private activity bonds. Besides supporting nonpublic functions, private activity bonds may also be issued to refund debt or bolster underfunded pension funds. While the interest on private activity bonds is typically taxable at the federal level, it is often tax-free at the local level