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

FAQs

What is an exempt facility bond? ›

Tax-exempt financing for projects that are government-owned or consist of private improvements within publicly-owned facilities. Bond proceeds are used for defined qualified purposes by a non-governmental entity (the “conduit borrower”).

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.

Understanding Industrial Revenue Bonds—IRBs

A general obligation bond makes its repayments from the general funds of the municipal issuer; they're backed by the full faith and credit of the issuer, which may increase taxes in order to meet its payment obligations.

Both general obligation bonds and revenue bonds are tax-exempt and low-risk, with issuers very likely to pay back their debts.

Investors favor municipal bonds, or "munis," for two main reasons. They are exempt from federal taxes, and they are relatively low-risk investments. While stable, income-producing bonds warrant a position in any well-diversified portfolio, there are inherent drawbacks to owning munis.

The main difference between a taxable municipal bond and a tax-exempt muni is that taxable munis pay interest income that's subject to federal and state income taxes, whereas tax-exempt munis pay interest income that's generally exempt from federal and state income taxes.

16. How are savings bonds taxed? Savings bond interest is exempt from state and local income tax. Savings bond interest is subject to federal income tax; however, taxation can be deferred until redemption, final maturity, or other taxable disposition, whichever occurs first.

In general, you must report the interest in income in the taxable year in which you redeemed the bonds to the extent you did not include the interest in income in a prior taxable year.

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).

Who sells Federal Home Loan Bank bonds? ›

Bonds issued by GSEs

These include bonds such as the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Banks and the Federal Farm Credit Banks.

Key Takeaways. Agency bonds are securities issued by U.S. government agencies or Government-Sponsored Entities (GSEs). Agency bonds are considered low-risk, although not as safe as U.S. Treasurys. Agency bonds can be callable and paid off by the borrower before they mature.

As of May 2024, the Principal High Yield Fund Class A (CPHYX) is the highest-yielding bond fund on our list at 7.1%. It also has the highest expense ratio at 0.94%. For every $1,000 invested in CPHYX, you'll pay a relatively hefty $9.40 to help cover the fund's expenses.

The main difference between a taxable municipal bond and a tax-exempt muni is that taxable munis pay interest income that's subject to federal and state income taxes, whereas tax-exempt munis pay interest income that's generally exempt from federal and state income taxes.

State and local governments sell tax-exempt Housing Bonds, commonly known as Mortgage Revenue Bonds (MRBs) and Multifamily Housing Bonds, and use the proceeds to finance low-cost mortgages for lower-income first-time homebuyers or the production of apartments at rents affordable to lower-income families.

Interest from Treasuries is generally taxable at the federal level, but not at the state level. Interest from munis is generally exempt from federal taxes, and if you live in the state where the bond was issued, the interest may also be exempt from state taxes.

A Bond Facility is often a prerequisite for exporters/suppliers and companies providing goods or services to buyers in overseas or domestic markets. The Afreximbank bonding facility helps by providing bonds (guarantees) to support eligible export-related contracts and other services.