Ta

or Indian tribal governments — the interest on which is

x-exempt bonds are valid debt obligations of state, local, 

tax-exempt. This means that the interest paid to bondholders

is not includable in their gross income for federal income

tax purposes.

The tax-exempt status of municipal obligations is not, 

however, a right to which the municipal finance community

is entitled. In South Carolina v. Baker, 485 U.S. 505

(1988), the U.S. Supreme Court stated: 

[T]he owners of state bonds have no constitutional 

entitlement not to pay taxes on income they earn from state

bonds, and states have no constitutional entitlement to issue

bonds paying lower interest rates than other issuers. 

The economic benefit of this tax-exempt status is a privilege

the federal government provides to governmental issuers as 

a matter of policy. Yet, this economic benefit comes with a

cost. The Department of the Treasury will realize an estimated

loss of federal tax revenue of almost $29 billion for the year

2003 alone.

The tax-exempt status of bonds remains throughout the 

life of the bonds provided that all applicable federal tax laws

are satisfied. Various restrictions apply under the Internal

Revenue Code including restrictions against issuing bonds

for the purpose of earning arbitrage profits or for the 

benefit of private persons. Other requirements, including

information filings, must also be met.

TEB CUSTOMER ACCOUNT

SERVICES TOLL-FREE AT

(877) 829-5500

TAX EXEMPT BONDS 

WEB SITE AT

www.irs.gov/bonds
TAX EXEMPT BONDS (TEB)

Tax Exempt Bonds (TEB) offers specialized

information and services to the municipal

finance community. Municipal bonds provide

tax-exempt financing for the furtherance 

of governmental and qualified purposes including the construction of airports, hospitals,

recreational and cultural facilities, schools,

water infrastructure, road improvements, 

as well as facilities and equipment used in 

providing police, fire and rescue services.

This TEB brochure highlights our unique 

services, including the Voluntary Closing

Agreement Program and our customer 

education and outreach efforts, which foster 

a better understanding of the applicable 

provisions of the federal tax law.

FIELD OPERATIONS

TEB Field Operations is responsible for identifying and

correcting noncompliance with fairness and the highest

level of integrity. Examinations are conducted at the issuer

level consistent with the continuing policy to avoid taxing

bondholders. Field Operations is also active in assisting in

the delivery of outreach assistance to the municipal finance

community as part of the TEB goal to help issuers understand the tax law to ensure up-front voluntary compliance. 
TAX EXEMPT BONDS (TEB)

Tax Exempt Bonds (TEB) offers specialized

information and services to the municipal

finance community. Municipal bonds provide

tax-exempt financing for the furtherance 

of governmental and qualified purposes including the construction of airports, hospitals,

recreational and cultural facilities, schools,

water infrastructure, road improvements, 

as well as facilities and equipment used in 

providing police, fire and rescue services.

This TEB brochure highlights our unique 

services, including the Voluntary Closing

Agreement Program and our customer 

education and outreach efforts, which foster 

a better understanding of the applicable 

provisions of the federal tax law.

FIELD OPERATIONS

TEB Field Operations is responsible for identifying and

correcting noncompliance with fairness and the highest

level of integrity. Examinations are conducted at the issuer

level consistent with the continuing policy to avoid taxing

bondholders. Field Operations is also active in assisting in

the delivery of outreach assistance to the municipal finance

community as part of the TEB goal to help issuers understand the tax law to ensure up-front voluntary compliance. 
TAX EXEMPT BONDS (TEB)

Tax Exempt Bonds (TEB) offers specialized

information and services to the municipal

finance community. Municipal bonds provide

tax-exempt financing for the furtherance 

of governmental and qualified purposes including the construction of airports, hospitals,

recreational and cultural facilities, schools,

water infrastructure, road improvements, 

as well as facilities and equipment used in 

providing police, fire and rescue services.

This TEB brochure highlights our unique 

services, including the Voluntary Closing

Agreement Program and our customer 

education and outreach efforts, which foster 

a better understanding of the applicable 

provisions of the federal tax law.

FIELD OPERATIONS

TEB Field Operations is responsible for identifying and

correcting noncompliance with fairness and the highest

level of integrity. Examinations are conducted at the issuer

level consistent with the continuing policy to avoid taxing

bondholders. Field Operations is also active in assisting in

the delivery of outreach assistance to the municipal finance

community as part of the TEB goal to help issuers understand the tax law to ensure up-front voluntary compliance. 
Ta

or Indian tribal governments — the interest on which is

x-exempt bonds are valid debt obligations of state, local, 

tax-exempt. This means that the interest paid to bondholders

is not includable in their gross income for federal income

tax purposes.

The tax-exempt status of municipal obligations is not, 

however, a right to which the municipal finance community

is entitled. In South Carolina v. Baker, 485 U.S. 505

(1988), the U.S. Supreme Court stated: 

[T]he owners of state bonds have no constitutional 

entitlement not to pay taxes on income they earn from state

bonds, and states have no constitutional entitlement to issue

bonds paying lower interest rates than other issuers. 

The economic benefit of this tax-exempt status is a privilege

the federal government provides to governmental issuers as 

a matter of policy. Yet, this economic benefit comes with a

cost. The Department of the Treasury will realize an estimated

loss of federal tax revenue of almost $29 billion for the year

2003 alone.

The tax-exempt status of bonds remains throughout the 

life of the bonds provided that all applicable federal tax laws

are satisfied. Various restrictions apply under the Internal

Revenue Code including restrictions against issuing bonds

for the purpose of earning arbitrage profits or for the 

benefit of private persons. Other requirements, including

information filings, must also be met.

TEB CUSTOMER ACCOUNT

SERVICES TOLL-FREE AT

(877) 829-5500

TAX EXEMPT BONDS 

WEB SITE AT

www.irs.gov/bonds
Ta

or Indian tribal governments — the interest on which is

x-exempt bonds are valid debt obligations of state, local, 

tax-exempt. This means that the interest paid to bondholders

is not includable in their gross income for federal income

tax purposes.

The tax-exempt status of municipal obligations is not, 

however, a right to which the municipal finance community

is entitled. In South Carolina v. Baker, 485 U.S. 505

(1988), the U.S. Supreme Court stated: 

[T]he owners of state bonds have no constitutional 

entitlement not to pay taxes on income they earn from state

bonds, and states have no constitutional entitlement to issue

bonds paying lower interest rates than other issuers. 

The economic benefit of this tax-exempt status is a privilege

the federal government provides to governmental issuers as 

a matter of policy. Yet, this economic benefit comes with a

cost. The Department of the Treasury will realize an estimated

loss of federal tax revenue of almost $29 billion for the year

2003 alone.

The tax-exempt status of bonds remains throughout the 

life of the bonds provided that all applicable federal tax laws

are satisfied. Various restrictions apply under the Internal

Revenue Code including restrictions against issuing bonds

for the purpose of earning arbitrage profits or for the 

benefit of private persons. Other requirements, including

information filings, must also be met.

TEB CUSTOMER ACCOUNT

SERVICES TOLL-FREE AT

(877) 829-5500

TAX EXEMPT BONDS 

WEB SITE AT

www.irs.gov/bonds