Exempt Facility Bonds | California Infrastructure and Economic Development Bank (IBank) (2024)

FAQs

What are exempt facility bonds? ›

Exempt facility bonds may be issued to finance docks and wharves and. their related storage or training facilities. IRC § 142(a)(2) provides that the term “exempt facility bond” means any bond issued as part of an issue 95 percent of the net proceeds of which are to be used to provide docks and wharves. Public Use.

The California Infrastructure and Economic Development Bank (IBank) was created in 1994 to finance public infrastructure and private development that promote a healthy climate for jobs, contribute to a strong economy and improve the quality of life in California communities.

Income from bonds issued by state, city, and local governments (municipal bonds, or munis) is generally free from federal taxes.

Interest on certain agency bonds, including securities issued by the FHLB and FFCB, is exempt from state taxes. Agency bonds, when bought at a discount, may subject investors to capital gains taxes when they are sold or redeemed. Investors should consult a tax professional for additional information.

The proceeds of the bonds are used to finance projects that benefit the community such as roads, schools, bridges, sewers, parks or water treatment. Most bonds issued by government agencies are tax-exempt.

Understanding Tax-Free Municipal Bonds

It's a go-to method for many municipalities to finance public projects, directly contributing to the socio-economic development of the area. Municipal bonds – or “munis” – are generally considered a lower-risk investment compared to stocks and corporate bonds.

With the new name of Banktivity replacing iBank, the products will retain their current version numbers to help keep things simple for current users.

The California Infrastructure and Economic Development Bank (IBank) is a state-owned, state-run financial institution based in Sacramento, California. The bank operates under the Bergeson-Peace Infrastructure and Economic Development Bank Act of 1994 and is governed by a five-member board of directors.

iBank is available for purchase directly from IGG Software and from other online retailers, including the Mac App Store. Purchases from the IGG store are backed by a 90-day money-back guarantee, but purchases from other retailers are subject to the policies of those stores.

If a bond is tax-exempt, the interest income earned on the bond is not subject to taxation by the U.S. federal government. If a bond is taxable, the interest income is federally taxable.

What are the tax-exempt bond proceeds used for? ›

Proceeds of these bonds may be used to finance activities of, or facilities owned, operated or used by, the issuer for its purpose or another state or local government for its own purposes.

Taxable Bonds may be issued to advance refund prior Tax-Exempt Bonds, and Tax-Exempt Bonds may be issued to advance refund outstanding Taxable Bonds in certain situations, under guidance provided by the IRS Office of Chief Counsel (Chief Counsel Advice Memorandum 201843009).

Common categories of exempt facilities financed with Tax-Exempt Bonds include airports, solid waste disposal facilities (e.g., landfills) and residential rental projects (commonly referred to as multifamily housing). Each category of exempt facility has specific requirements to qualify for Tax-Exempt Bond financing.

FHLBank investments are also very safe. By regulation, they are prohibited from purchasing non-investment grade securities and nearly all of their investments are triple-A rated. Each bank is registered with the SEC and is supervised and regulated by the Federal Housing Finance Agency (FHFA).

Use the Education Exclusion

You can skip paying taxes on interest earned with Series EE and Series I savings bonds if you're using the money to pay for qualified higher education costs. That includes expenses you pay for yourself, your spouse or a qualified dependent.

Municipal bonds are generally referred to as tax-exempt bonds because the interest earned on the bonds often is excluded from gross income for federal income tax purposes and, in some cases, is also exempt from state and local income taxes.

"Exempt Facilities" are privately owned projects that are financed with tax-exempt “private activity” bonds using state and local government entities as the conduit issuers of such bonds. Exempt facilities include (but are not limited to): Solid waste disposal facilities. Sewage facilities. Water furnishing facilities.

Instruments exempt from the registration requirements of the Securities Act of 1933 or the margin requirements of the SEC Act of 1934. Such securities include government bonds, agencies, munis, commercial paper, and private placements.

Private activity bonds are issued to attract businesses and labor to a region in order to derive a public benefit, which would qualify the bond for tax-exempt status. These bonds pay taxable interest unless specifically exempted by the federal government.