The taxable municipal bond market developed following the 1986 tax law reform. Among other changes, the reform eliminated municipalities’ ability to issue tax-exempt bonds for anything that did not benefit the public at large. Municipalities could issue only taxable bonds for projects that did not meet the public-benefit standard.

While the taxable municipal bond market grew consistently from 2003-2008, comprising close to 8 percent of total municipal bond issuance and roughly $30 billion per year, the Build America Bond (BAB) program grew the market significantly (with over $180 billion in issuance).

The Build America Bond program allowed municipalities to issue taxable bonds in the place of what traditionally would be tax-exempt borrowings and receive a 35 percent subsidy on the coupon payment directly from the federal government. Although the program expired on 12/31/10, Breckinridge believes that the benefits of the program warrant its reconsideration in the next legislative session.

Introduction to Build America Bonds

Taxable Muni FAQs

White Papers

July 2010 - Advantages of Taxable Muncipals vs. Corporates

March 2010 - Building a Fixed-Income Portfolio with Taxable Municipal Bonds

May 2009 - Taxable Municipal Bond Portfolios