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Named after its legislative sponsors, the Marks-Roos Local Bond Pooling Act (California Government Code §6584-6599.1) is a law enacted by the California Legislature in 1985. [ 1 ] [ 2 ] The main purpose of this statute is to allow local California governments to work together to get financing in a way that will conceivably lower borrowing costs.
Muni arb is a relative value strategy that seizes upon an inefficiency that is related to government tax policy; interest on municipal bonds is exempt from federal income tax. [1] [2] Because the source of this arbitrage is artificially imposed by government regulation, it has persisted (i.e., it has not been "arbed away") for decades. [3]
[1] Build America Bonds can provide states and localities with substantial savings on their borrowing costs. According to the United States Department of the Treasury, the savings for a 10-year bond are estimated to be 31 basis points and the savings for a 30-year bond are estimated to be 112 basis points versus traditional tax-exempt financing ...
Short-term gains from bonds held for less than a year are taxed at your ordinary income tax rate, while long-term gains from bonds held for more than a year are taxed at a lower rate, typically ...
For example, imagine you pay federal tax at a 24 percent rate and state tax at a rate of 6 percent, and the municipal bond offers a yield of 3 percent.
The IRS sent three "Notices of Proposed Issues" in January 2009, challenging the tax-exempt status of the bonds on three grounds: the Issuer does not qualify as a political subdivision or "on behalf of the issuer" of tax-exempt bonds pursuant to Section 1.103-I(b) of the Internal Revenue Code regulations,
Tax-free municipal bonds are not just a source of investment but also a significant contributor to public projects such as roads, schools and hospitals. These debt instruments are issued by local ...
A 2007 study concluded that the average investment grade tax exempt 1-10 year municipal bond traded 21 times over its 11-year sample and 5.65% of issues only traded once. [ 21 ] Unlike corporate and Treasury bonds, which are more likely to be held by institutional investors, municipal bond owners are more diverse, and hence harder to locate ...