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Friday, February 14, 2020 | History

2 edition of Guide to state and local taxation of municipal bonds found in the catalog.

Guide to state and local taxation of municipal bonds

Steven J. Hueglin

Guide to state and local taxation of municipal bonds

  • 211 Want to read
  • 33 Currently reading

Published by Gabriele, Hueglin & Cashman in New York, N.Y. (2 Wall St., New York 10005) .
Written in English

    Places:
  • United States.
    • Subjects:
    • Municipal bonds -- Taxation -- United States.

    • Edition Notes

      Statementby Steven J. Hueglin, Karyn Ward.
      ContributionsWard, Karyn., Gabriele, Hueglin & Cashman.
      Classifications
      LC ClassificationsKF6765.5.S4 H84
      The Physical Object
      Paginationiii, 84 p. ;
      Number of Pages84
      ID Numbers
      Open LibraryOL3522554M
      LC Control Number82106642

      GASB Pension Implementation Toolkit : The Governmental Accounting Standards Board created this to help preparers, auditors and users of state and local government financial reports understand and apply the revised pension accounting and financial reporting standards that go into effect this year. The anticipated use and drawdown of the invested proceeds, such as projected expenditures for capital projects or use for coverage of debt service, will be a major consideration in the investment of the proceeds. To figure that out, you'll need to calculate the taxable equivalent yield. Since federal taxes can be deducted from the calculation of state taxes, you'd really only have to pay that In those cases, while the municipality is the issuing entity, a third party is responsible for payments of both interest and principal. The third-party borrower—not the issuing conduit agency—is responsible for interest payments and principal repayments.

      One of the disadvantages of a bond mutual fund is the additional level of expense from the fund management fee. In addition, there are other types of municipal securities that are taxable at the federal, state and local levels. Registered and book-entry bonds offer protection and convenience to bondholders, including protection from loss or theft, automatic payment of interest, notification of calls and ease of transfer. This is especially true for small and medium-sized communities.

      Municipal bonds, or munis as they are sometimes known, are debt securities. In addition, the bank or financial professional will provide the investor with a confirmation that is a written record of the transaction. The escrow account is most often funded with U. There's a risk with revenue munis that if the revenue stream dries up, investors won't have any recourse.


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Guide to state and local taxation of municipal bonds book

In the event of payment default by the issuer, an insurance company — which guarantees payment — will send you both interest and principal when they are due. Historically, municipal bonds rated by a Nationally Recognized Statistical Rating Organization NRSROand in particular general obligation bonds, have experienced very low default rates.

Tab 9 of 15 Understanding Calls Many bonds allow the issuer to call — or retire— all or a portion of the bonds at a premium, or at par, before maturity. This, in turn, allows you to buy more bonds if you so desire. The bonds are typically offered on a schedule, which highlights the different maturities and yields.

Procedures should be established to monitor any arbitrage rebate liabilities and reserve liabilities for future remittance to the IRS. If you are unsure of whether a specific muni is subject to AMT, be sure to consult the broker before purchase.

Specifically, brokers may be considered Municipal Advisors if they provide advice on investments of bond proceeds to governments. Example: If you are looking at a 20 year municipal bond with a revised issue price of 99 and nine complete years left until maturity, the de minimis discount is 0.

Private-sector corporations such as hospitals and universities. Default risk While municipal bankruptcies and defaults can and do occur, they have been relatively infrequent when compared to the corporate bond market.

The State of State (and Local) Tax Policy

Adherence to the investment policy signals to rating agencies, the capital markets and the public that a government agency is well managed and is earning interest income suitable to its situation and economic and regulatory environment. While many municipal bonds offer income exemption from both federal and state taxes, not all munis have these tax features.

Investment of Bond Proceeds Upon the issuance of bonds by a State or local government, the bond proceeds are usually deposited in various funds. As in most years, roughly 40 percent of municipal debt was issued by states and 60 percent by local governments.

Table of Contents

Investors should take into account the creditworthiness of both the insurer and the issuer when considering insured bonds. Issuers should develop and adhere to investment policies and activities that minimize these risks.

In fact, most aren't. For example, a municipality may issue a bond that does not qualify for federal tax exemption, resulting in the income generated by that bond being subject to federal taxes.

While municipal bonds' coupons are often lower than those offered by similarly rated corporate bondsthe fact that interest income is tax-free can result in the yields being comparable, or even higher in some cases.

Fixing Municipal Finance, by the Book

According to the Municipal Securities Rulemaking Board MSRBit is much more common to identify basic characteristics of a municipal bond in which an investor is interested in investing e. If the market discount is above the De Minimis threshold, it will be taxed at your ordinary income tax rate.

These are provisions that give a bond issuer the right to call the bonds due to a one-time occurrence, such as a natural disaster, interruption to a revenue source, unexpended bond proceed, or canceled projects.

On the other hand, your taxable brokerage account would be a good place to put tax-free municipal bonds in order to take advantage of the tax exemptions. Typically, these bonds are exempt from federal income tax. Municipal bonds are exempt from federal taxes and most state and local taxes, making them especially attractive to people in high income tax brackets.

Tab 2 of 15 What are Municipal Bonds? Selling prior to maturity can present a challenge for municipal bond investors due to the fragmented and thinly traded nature of the market. The revised issue price is par for a bond originally issued at a price greater than or equal to par.additional stock, is taxable.

The portion of income derived from bonds of the U.S. government and its agencies or bonds of the state of Tennessee and its counties and municipalities are exempt. 3. Market value of stock in a corporation given by another corporation as.

Many of these bonds are issued by special authorities created for that particular purpose. State and local government entities also issue municipal bonds in the form of revenue bonds in which the issuer loans the proceeds of the bonds to an underlying borrower who is a private entity, such as a non-.

Guide to Bond Premium and Market Discount. Authors: Carol Warley, partner, RSM US LLP You should consider state taxation of tax-exempt bond interest and bond premium.

The interest from those Bonds may be subject to state income tax. In addition, certain states may not require (or permit) amortization of bond premium on tax-exempt bonds.

You can buy individual municipal bonds through bond dealers, banks, brokerage firms, and in a few cases, directly from the municipality. You can buy them either on the primary market, which is for new-issue bonds, or on the secondary market, which is a market for trading bonds after the bond has already been issued on the primary market.

Beginner’s Guide to Bond Mutual Funds Mark P. Cussen | Municipal bonds are second only to Treasury securities in terms of safety of principal. The interest from municipal securities is usually tax-free at the federal and state level and often at the local level as well for investors who live in the jurisdiction of the issuer, and they are.

Governing Magazine's Finance This ongoing series goes back to the basics to help public officials navigate the sometimes-confusing world of GASB, OPEB, DBs and P3s.