i.4.5 Issuing Tax-Exempt Debt

i.4.5 Issuing Tax-Exempt Debt

The federal government through the Tax Code and related U.S. Treasury regulations imposes rules that must be satisfied for interest on municipal debt to be tax exempt. See Chapter 4 – Federal and State Tax Law Requirements. These rules include (1) a requirement that the debt be issued by a qualified issuer, (2) limitations on the uses of the financed facilities, (3) limitations on a public agency’s ability to take advantage of the “arbitrage” opportunities available given the lower interest rates associated with tax exempt bonds, and (4) administrative and procedural requirements. These are described below.