4.1 California Tax Exemption

4.1 California Tax Exemption

State statutes providing for the issuance of bonds generally provide for the exemption of interest on the bonds from State of California personal income taxes, regardless of the federal income tax status of the bonds. Article XIII, Section 26(b) of the California Constitution, moreover, expressly provides, “Interest on bonds issued by the State or a local government in the State is exempt from taxes on income.” Although interest on bonds issued by California public agencies is exempt from State of California personal income taxes, it is not exempt from other taxes such as corporate taxes. In addition, bondholders may experience other tax consequences, such as a taxable gain upon the sale or disposition of a bond.