Reimbursement
Use of bond proceeds to pay project costs prior to the issuance of bonds. Reimbursement raises questions related to whether the reimbursement qualifies as an expenditure of tax-exempt bond proceeds for federal income tax purposes.
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Certificate of Participation (“COP”)
Financing that allows an investor to purchase a participation interest in a stream of payments generated by a lease, installment sale agreement or other governmental obligation. COPs themselves are not municipal obligations but are instead an interest in an underlying municipal obligation. Examples of items financed with COPs proceeds include computers, telephone systems, courthouses, detention facilities, school buildings and recreational facilities. Sometimes COPs are issued with respect to an underlying governmental obligation or pool of obligations that has already been issued or created. For example, governmental installment sale agreements are often packaged together for resale after their execution by the vendor or a financing company through a COPs issuance. It is important to note that not all leases, installment sale agreements or governmental obligations can generate tax-exempt interest, since, in addition to other requirements, only instruments evidencing a government’s borrowing power can bear tax-exempt interest.
All the Bonds
Learn more about the various types of municipal obligations you may encounter.
