Business and Personal Finance Dictionary

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• MUNICIPAL BONDS
  
  Debt instruments are issued by any of the 50 states, the territories and their subdivisions, counties, cities, towns, villages and school districts, agencies, such as authorities and special districts created by the states, and certain federally sponsored agencies such as local housing authorities. The funds go to support a government's general financing needs or for special projects. Municipal bonds are free from federal tax on the accrued interest and may also be free from state and local taxes if they are issued in the state of residence. For example, a resident of New York who buys a municipal bond issued by the state of New York, will not pay New York State or local taxes on it. However, if a resident of New York buys a municipal bond from a city in Connecticut, state and local tax will be owed on the accrued interest. Keep in mind that any profit realized from the purchase or sale is not exempt from tax. Only the accrued interest is tax exempt. The U.S. government's Federal Reserve system brings U.S. government, Treasury bonds issues public. There is no agency that handles municipal bond issues. However, there are brokerage firms which specialize in bringing out municipal bond issues. There are several types of municipal bonds. They are: General Obligation Bonds, Limited and Special Tax Bonds, Industrial Revenue Bonds, Housing Bonds, Moral Obligation Bonds, Double Barreled Bonds, Tax Anticipation Notes, Bond Anticipation Notes, and Revenue Anticipation Notes.
  
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