Are all munis tax-exempt, and are all tax-exempt bonds munis?
Although most municipal bonds are exempt from gross income for federal income tax purposes and in many cases also exempt from taxation by the issuer’s home state, some municipal bonds are issued on a taxable basis. In other cases, a municipal bond, often referred to as an “AMT bond,” may qualify for the tax exemption under the normal calculation of federal income tax but may be subject to the federal alternative minimum tax. At initial issuance, a legal opinion from a law firm (“bond counsel”) typically is delivered describing the tax consequences of investing in the bonds. A copy of this legal opinion is often included in the official statement for the bonds. Although most tax-exempt bonds are municipal bonds, in some cases other types of debt securities qualify for tax exemption, such as bonds issued by federally recognized Indian tribal governments or for certain other tax-favored non-municipal purposes. EMMA is designed to provide information solely about municipal securities.
