Municipal Bonds, 2012–2013
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Municipal Bonds, 2012–2013
by Kelly Dauberman and Aaron Barnes
O
verall municipal bond issuances fell from $496.0 billion in
2012 to $422.4 billion in 2013 (Figure A).1 The majority
of municipal bond issuances in 2012 and 2013 came from
tax-exempt bonds. Because of this, the article will mainly focus
on the tax-exempt bond issuances for those years. At the end
of the article, there is an additional section on credit payments
made to issuers of direct payment bonds from 2009 to 2013.2
However, the article excludes analysis of direct payment and
tax credit bonds due to their low overall issuances during this
period.
State and local governments issue tax-exempt bonds to finance operational and infrastructure needs.3 Tax-exempt bonds
have a longstanding history and provide bondholders (investors) interest payments exempt from Federal taxation and,
often, State and local taxation. Tax-exempt bonds are classified
as either “governmental” or “private activity,” depending on
whether the proceeds are used and secured by public or private
entities and resources.
The tax-exempt bond data presented here are compiled
from the populations of Forms 8038, Information Return for
Tax-Exempt Private Activity Bond Issues, and Forms 8038-G,
Information Return for Tax-Exempt Governmental Obligations,
filed with the Internal Revenue Service (IRS) for bonds issued
during the given calendar years.4 Data for issuers of direct payment bonds requesting credit payments are based on the population of Forms 8038-CP, Return for Credit Payments to Issuers
of Qualified Bonds, filed in a given calendar year.
The following sections discuss several defining characteristics of tax-exempt bonds and provide an overview of the market
for tax-exempt bonds during the 2-year period 2012 through
2013.
Background Information on Tax-Exempt Bonds
When a bond is issued, the issuer is obligated to repay the
borrowed funds at a specified interest rate, by a specific date.
For Federal income tax purposes, investors who purchase governmental bonds and certain types of qualified private activity bonds are able to exclude the interest they earn from their
gross incomes.5,6 This tax exemption lowers the borrowing cost
incurred by the issuers, since holders of
This tax
tax-exempt bonds are generally willing to
exemption lowers
accept an interest rate that is lower than
the borrowing cost
that earned on comparable taxable bonds. 7
incurred by the isThe “spread” between high-grade municisuers, since holders
pal bonds and high-grade corporate bonds
of tax-exempt bonds
varied from 0.5 percent to 1.5 percent,
are generally willing
depending on the bonds’ maturity dates.
to accept an interest
Spread is a measure of the difference berate that is lower
tween the two investment yields. Investors
than that earned on
in higher tax brackets have a greater tax
comparable taxable
incentive to invest in tax-exempt bonds
bonds.
than investors in lower brackets because
the required yield on a taxable bond needs
to be even greater than a tax-exempt bond for a comparable
after-tax benefit.8
Tax-exempt bonds fall into two classifications: “governmental” or “private activity.” Governmental bond proceeds finance
government operations, facilities, and services for general public
Highlights for 2012 and 2013
•• Municipal bond issuances totaled $918.4 billion, 99.6 percent of
which were tax-exempt bonds.
•• Governmental bonds financed almost $729.6 billion in public
projects such as schools, transportation infrastructure, and utilities in 2012 and 2013, while private activity bonds accounted for
the remaining 20.3 percent of all tax-exempt bonds over the same
period.
•• Long-term bonds accounted for more than 80 percent of all governmental bonds and over 99 percent of all private activity bonds
issued in 2012 and 2013.
•• Over three-fifths (61 percent) of all long-term, governmental bond
proceeds financed education, utilities, and transportation projects
in 2012 and 2013, and nearly two-thirds (63.9 percent) of long-term
private activity bonds financed qualified section 501(c)(3) bonds.
•• The top 5 States issued 43.1 percent of the total “new money” longterm tax-exempt governmental bonds.
For Calendar Year 2011 data, see Barnes, Aaron, “Municipal Bonds, 2011,” Statistics of Income Bulletin, Summer 2014.
Issuers of direct payment bonds and specified tax credit bonds may request credit payments from the Treasury based upon interest payments made to bondholders using Form 8038-CP.
The term “State” includes the District of Columbia and any possessions of the United States. The term “State” also includes Federally recognized Indian Tribal governments.
4
Bond issuers were required to file these information returns by the 15th day of the second calendar month after the close of the calendar quarter in which the bond was issued.
5
In addition, for State income tax purposes, most States allow for the exclusion of interest on bonds issued by government agencies within their own States, thus increasing the benefit to the
bondholder.
6
The extent of exclusion of interest income can vary with taxpayer characteristics. For example, banks and insurance companies may be limited as to how much tax-exempt interest they can
exclude.
7
The interest exclusion for tax-exempt bonds is not allowed for arbitrage bonds or unregistered bonds. An arbitrage bond is one in which any portion of the proceeds is used to purchase higheryielding investments or is used to replace proceeds that have been used to purchase higher-yielding investments. Certain rules allow for arbitrage earnings with respect to tax-exempt bonds
within a specified period, as long as these earnings are rebated to the Department of the Treasury.
8
For more information on taxable and tax-exempt rate comparisons see: http://www.investinginbonds.com/learnmore.asp?catid=8&subcatid=53&id=206.
1
2
3
Statistics of Income Bulletin | Spring 2016
www.irs.gov/taxstats
Municipal Bonds, 2012–2013
Figure A
Tax-Exempt, Taxable Direct Payment, and Tax Credit Bonds, 2011–2013
[Money amounts are in millions of dollars]
2011
2012
2013
Number
Amount
Percentage
of total amount
Number
Amount
Percentage
of total amount
Number
Amount
Percentage
of total amount
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
24,282
390,629
100.0
27,926
496,047
100.0
26,162
422,391
100.0
23,612
384,257
98.4
27,652
493,800
99.5
25,995
421,131
99.7
Taxable direct payment bonds [2]
614
6,156
1.6
239
2,155
0.4
93
1,016
0.2
Tax credit bonds [3]
56
216
[4]
35
92
[4]
74
244
0.1
Type of bond
Total [1]
Tax-exempt bonds
[1] Includes combined data from all governmental, private activity bond, and specified tax credit and tax credit bond returns (Form 8038-G, Information Return for Tax-Exempt Governmental Obligations; Form
8038, Information Return for Tax-Exempt Private Activity Bond Issues ; and Form 8038-TC, Information Return for Tax Credit Bonds and Specified Tax Credit Bonds ).
[2] Includes specified tax credit bonds reported on Form 8038-TC that indicate the issuer elected to apply section 6431(f) to receive a refundable credit in lieu of tax credits under section 54(A). Issuers who elect
to apply section 6431(f) are eligible to receive Federal direct payments and the bonds are classified as "taxable direct payment bonds" for purposes of this table.
[3] Excludes bonds reported on Form 8038-TC that indicate the issuer elected to apply section 6431(f) to receive a refundable credit in lieu of tax credits under section 54(A). See footnote 2, above.
[4] Less than 0.05 percent.
NOTE: Detail may not add to totals because of rounding.
SOURCE: IRS, Statistics of Income Division, Tax-Exempt Bonds, November 2015.
use. Governmental sources pay the debt service on these bonds.9
Private activity bonds are issued by, or on behalf of, State or
local governments to finance a project sponsored by a private
user. Since private activity bond proceeds are used by one or
more private entities, the debt service is paid or secured by one
or more private entities.10 Interest income on most private activity bonds is taxable. However, Congress has deemed certain
types of private activities necessary for the public good and,
therefore, interest earned on “qualified private activity bonds,”
as defined in IRC section 141(e), is generally tax exempt. 11,12
The total annual amount of tax-exempt bond issuances for the
years covered in this article was $493.8 billion (Calendar Year
2012) and $421.1 billion (Calendar Year 2013). During this
time, governmental bonds accounted for roughly 80 percent of
total tax-exempt bond proceeds, while private activity bonds accounted for the remaining 20 percent.
or other capital improvement projects. Of the tax-exempt governmental bonds issued in 2012 ($389.8 billion) and 2013
($339.7 billion), long-term bonds accounted for $324.3 billion
and $283.4 billion. This made up more than four-fifths (83.2
percent and 83.4 percent) of all governmental bond proceeds.
Tax-exempt bonds issued for short-term projects accounted
for nearly 17 percent of governmental bond issuances and less
than 1 percent of the private activity issuances. Most short-term
governmental bonds are issued in the form of tax anticipation
notes (TANs), revenue anticipation notes (RANs), or bond anticipation notes (BANs). TANs and RANs generally mature
within 1 year of issuance, at which time the proceeds are paid
from specific tax receipts or other revenue sources. BAN proceeds are typically used to pay for start-up costs associated with
a future, long-term, bond-financed project. A renewal BAN can
be issued on maturity of an outstandLong-term
ing
BAN, until the proceeds of the
bonds make up
future
bond issue are used to pay off,
the majority of the
or
retire,
the outstanding BAN. In total,
tax-exempt bond
BANs,
TANs,
and RANs accounted for
market because they
almost
$62.1
billion
in 2012 and $55.5
are generally used to
billion
in
2013,
or
nearly
15.9 percent
finance construction
(2012)
and
16.3
percent
(2013)
of the
or other capital im13
total
governmental
bond
proceeds.
provement projects.
Most Tax-Exempt Bonds Are Long-Term Issuances
Bonds are classified as either short term or long term, depending
on the length of time from issuance to maturity. Bonds typically
classified as short term mature in less than 13 months, while
bonds classified as long term mature in 13 months or more.
Long-term bonds make up the majority of the tax-exempt bond
market because they are generally used to finance construction
See section 7871(c) of the Internal Revenue Code for tax-exempt bond requirements for Indian Tribal governments.
Section 141(a) of the Internal Revenue Code (IRC) provides that the term private activity bond means any bond issued as part of an issue that meets: 1) the private business tests set forth in
the IRC section 141(b); or 2) the private loan financing test set forth in IRC section 141(c). The private business tests of IRC section 141(b) define a bond as a private activity bond if both of the
following criteria are met: 1) more than 10 percent of the bond proceeds are used for a private business purpose; and 2) more than 10 percent of the bond debt service is derived from private
business use and is secured by privately used property. The private loan-financing test of IRC section 141(c) defines a bond as a private activity bond if the amount of proceeds used to (directly
or indirectly) finance loans to nongovernmental persons exceeds the lesser of $5 million or 5 percent of the proceeds.
11
Tax-exempt private activity bonds include exempt facility bonds, qualified mortgage bonds, qualified veterans’ mortgage bonds, qualified small issue bonds, qualified student loan bonds,
qualified redevelopment bonds, and qualified section 501(c)(3) bonds, all of which are defined in the “Explanation of Terms” section of this article. Examples of exempt facilities include airports;
docks and wharves; sewage facilities; solid waste disposal facilities; qualified residential rental projects; and facilities for the local furnishing of electricity or gas. Qualified section 501(c)(3)
bonds are issued by State and local governments to finance the activities of charitable and similar organizations that are tax exempt under IRC section 501(c)(3). The primary beneficiaries of
these bonds are hospitals, universities, and organizations that provide low-income housing or assisted living facilities.
12
The interest income from qualified private activity bonds (other than qualified section 501(c)(3) bonds) is considered a tax preference for the alternative minimum tax calculations.
13
Data compiled for BAN/RAN/TAN include short-term issues and are not comparable to tables found in the SOI Tax Stats Tax-Exempt Bonds Statistics Webpage.
9
10
Statistics of Income Bulletin
2
Spring 2016
Municipal Bonds, 2012–2013
Figure B
Long-Term Governmental Bonds Issued, by Type and Issue Year,
2009–2013
Figure C
Long-Term Private Activity Bonds Issued, by Type and Issue Year,
2009–2013
[Billions of dollars]
[Billions of dollars]
350
140
$324.3
$123.6
$283.4
300
120
$262.4
250
$232.5
$217.3
$195.4
200
150
$151.1
$111.4
$60.3
60
$118.4
$122.6
$114.1
$94.6
$128.9
$86.0
$138.6
40
$52.2
$63.3
$60.2
$45.5
$43.5
$43.3
$50.6
$37.5
$40.5
20
50
0
2010
2011
2012
2009
2013
2010
Issue year
All issues
New money proceeds
2011
2012
2013
Issue year
Refunding proceeds
All issues
New money proceeds
Refunding proceeds
NOTE: Detail may not add to totals because of rounding.
SOURCE: IRS, Statistics of Income Division, Tax-Exempt Bonds, November 2015.
NOTE: Detail may not add to totals because of rounding.
SOURCE: IRS, Statistics of Income Division, Tax-Exempt Bonds, November 2015.
Refunding Bond Issuances Increased Sharply in 2012
Then Declined in 2013
Most Long-Term, Tax-Exempt Bonds Are Issued for a
Few Select Purposes
Total bond issuances are composed of both nonrefunding (“new
money”) issues and refunding issues. New money proceeds
finance new capital projects, while refunding proceeds retire
outstanding bonds. During the refunding process, newly issued
bond proceeds are used to pay off the outstanding balance of
a previously issued bond(s). A bond issue can include both
new money and refunding proceeds. Figures B (governmental)
and C (private activity) show total long-term bond issuances,
as well as their distribution between new money and refunding proceeds, between 2009 and 2013. Within Figure B, 2012
stands out as a peak year, with long-term governmental bond issuances totaling $324.3 billion, an increase of 39.5 percent over
2011. Long-term private activity bond issuances increased 20.3
percent from 2011 to 2012; however, the 2012 bond issuance
amount remained below its 2010 level (Figure C). These increases in bond issuances in 2012 were largely driven by an increase in refunding issues, which may be due to State and local
governments taking advantage of the low interest rate environment. Moreover, interest rates were also near historical lows in
2013, and refunding bond issuances decreased in that year. One
possible explanation is that there were fewer refunding opportunities, due to the prolonged period of low interest rates, so
refunding volumes declined.
14
$81.1
80
$144.8
100
0
2009
$103.5
$102.8
100
Figures D (governmental) and E (private activity) each display
long-term, tax-exempt bond proceeds by selected purpose and
type of issue for 2012 and 2013. In both years, more than 60
percent of long-term, governmental bond proceeds financed
education, utilities, and transportation projects (Figure D). In 2012 and 2013 comMore than
bined, States and local governments used 60 percent of
29.4 percent of proceeds for “other bond long-term, govpurposes” not separately allocated by the ernmental bond
issuer, or for issues that do not apply to proceeds financed
any of the specific purposes listed on Form education, utili8038-G. For example, filers often catego- ties, and transporrize bonds for capital improvements, which tation projects.
are bonds issued to fund multiple purposes,
in the other bond purpose line.
Qualified 501(c)(3) bonds are private activity bonds issued
by 501(c)(3) organizations that meet the requirements of section
145(a). Generally, a 501(c)(3) organization must be organized
and operated exclusively for educational, religious, or charitable purposes, and no part of the organization’s net earnings
may inure to or for the benefit of any private shareholders or individuals.14 Two types of qualified 501(c)(3) bonds—qualified
hospital bonds and qualified nonhospital bonds—accounted for
For additional information on qualified section 501(c)(3) private activity bonds, see https://www.irs.gov/pub/irs-pdf/p4077.pdf.
Statistics of Income Bulletin
3
Spring 2016
Municipal Bonds, 2012–2013
Figure D1
Long-Term Tax-Exempt Governmental Bonds, by Selected Bond Purpose and Type of Issue, 2012
[Billions of dollars]
120
100
80
$58.4
60
$60.4
40
$29.4
20
0
$39.3
Other purposes [1]
$34.4
Education
$32.0
$22.6
$18.0
$9.7
$7.8
$2.7
Transportation
Utilities
Environment
Public safety
$2.4
$4.0
$1.8
Health and hospital
Bond purpose
New money proceeds
Refunding proceeds
Figure D2
Long-Term Tax-Exempt Governmental Bonds, by Selected Bond Purpose and Type of Issue, 2013
[Billions of dollars]
90
80
70
60
$42.2
$40.1
50
$18.1
40
30
20
$22.3
$41.9
$39.4
10
0
$31.5
$15.4
Education
Other purposes [1]
Transportation
Utilities
$9.3
$3.8
$7.2
Environment
$3.1
Health and hospital
$1.9
$3.1
Public safety
Bond purpose
New money proceeds
Refunding proceeds
[1] "Other purposes" refers to obligations for which a specific purpose either did not apply or was not clearly indicated on the Form 8038-G. It does not include specific purposes, such as housing and
bond and tax/revenue anticipation notes, that are not shown separately in this figure. See Table 2.
SOURCE: IRS, Statistics of Income Division, Tax-Exempt Bonds, November 2015.
Statistics of Income Bulletin
4
Spring 2016
Municipal Bonds, 2012–2013
Figure E1
Long-Term Tax-Exempt Private Activity Bonds, by Selected Bond Purpose and Type of Issue, 2012
[Billions of dollars]
40
35
30
25
$22.2
20
$21.0
15
10
$12.4
5
0
$1.4
$7.0
$11.1
$5.6
$2.2
Qualified section 501(c)(3)
nonhospital
Qualified hospital facility
Airports
Qualified residential rental
facility
$3.4
$2.6
Qualified mortgage
Bond purpose
New money proceeds
Refunding proceeds
Figure E2
Long-Term Tax-Exempt Private Activity Bonds, by Selected Bond Purpose and Type of Issue, 2013
[Billions of dollars]
35
30
25
$17.1
20
15
$11.5
10
$15.5
5
0
Qualified section 501(c)(3)
nonhospital
$1.8
$7.2
$6.4
Qualified hospital facility
Qualified residential rental
facility
$4.0
$1.4
$3.1
$1.9
Airports
Qualified mortgage
Bond purpose
New money proceeds
Refunding proceeds
SOURCE: IRS, Statistics of Income Division, Tax-Exempt Bonds, November 2015.
Statistics of Income Bulletin
5
Spring 2016
Municipal Bonds, 2012–2013
nearly two-thirds of long-term, private activity bond proceeds
in both 2012 (64.4 percent) and 2013 (63.3 percent). However,
total qualified hospital facility bond issuances decreased by 41.7
percent, from $32.1 billion in 2012 to $18.7 billion in 2013
(Figure E).
Figure F
States with Largest Decreases and Increases in Amount of New
Money Long-Term Tax-Exempt Governmental Bonds Issued, 2012
and 2013
[Billions of dollars]
State of issue
2012
amount
2013
amount
Change in
amount
Percentage
change in
amount
(4)
(1)
(2)
(3)
All States, total
States with
decreases:
128,877
144,824
15,947
12.4
Virginia
4,711
3,076
-1,635
-34.7
Colorado
3,640
2,081
-1,559
-42.8
Pennsylvania
7,847
6,608
-1,239
-15.8
Illinois
6,245
5,468
-777
-12.4
Nebraska
States with
increases:
1,595
855
-740
-46.4
California
12,892
20,442
7,550
58.6
New York
14,068
16,498
2,430
17.3
Texas
12,896
15,090
2,194
17.0
New Jersey
3,205
4,876
1,671
52.1
Oregon
1,196
2,503
1,307
109.3
States with Large Populations Issue Most Tax-Exempt
Bonds
Figure F presents data for States with the largest net decreases
and net increases in the dollar amount of new money long-term,
tax-exempt governmental bonds issued in 2012 and 2013. Large
changes in this type of bond issuance may indicate a change in
State-level investment in new capital projects. For all the States,
total new money long-term, governmental bond proceeds increased slightly more than $15.9 billion (12.4 percent) from
2012 to 2013, rising to $144.8 billion. Virginia and Colorado
decreased their net proceeds in dollar terms by more than all
other States in 2013. California increased (by $7.6 billion) its
net proceeds more than all other States, issuing $20.4 billion in
2013.
The amount of governmental bond proceeds for the top 15
States in terms of total dollar volume of new money long-term,
tax-exempt bonds issued for 2012 and 2013 combined was 69.8
percent of the $273.7 billion total (Figure G). Authorities in the
SOURCE: IRS, Statistics of Income Division, Tax-Exempt Bonds, November 2015.
Figure G
New Money Long-Term Tax-Exempt Governmental Bond Proceeds, by Selected Bond Purpose, for Top 15 States, Ranked by Total
Issuances, 2012 and 2013 Combined [1]
[Money amounts are in millions of dollars]
Selected bond purpose
State of issue
Total
amount
Other purposes [2]
Amount
Percent of
State total
(3)
Education
Utilities
Transportation
Amount
Percent of
State total
(4)
(5)
Amount
Percent of
State total
(6)
(7)
Environment
Amount
Percent of
State total
Amount
Percent of
State total
(8)
(9)
(10)
(11)
(1)
(2)
All States, total
273,701
94,848
34.7
76,320
27.9
54,124
19.8
33,391
12.2
15,016
5.5
California
33,334
7,999
24.0
12,810
38.4
5,879
17.6
5,073
15.2
1,574
4.7
New York
30,566
18,525
60.6
2,489
8.1
8,773
28.7
503
1.6
276
0.9
Texas
27,986
6,517
23.3
9,464
33.8
5,320
19.0
6,455
23.1
229
0.8
Pennsylvania
14,455
7,480
51.7
2,404
16.6
2,173
15.0
580
4.0
1,817
12.6
Illinois
11,713
3,575
30.5
3,355
28.6
3,502
29.9
597
5.1
685
5.8
Ohio
10,029
2,578
25.7
3,606
36.0
1,749
17.4
1,837
18.3
261
2.6
Washington
8,583
2,787
32.5
2,099
24.5
2,101
24.5
979
11.4
617
7.2
Florida
8,480
3,389
40.0
1,050
12.4
2,542
30.0
1,257
14.8
242
2.9
New Jersey
8,081
1,872
23.2
1,615
20.0
d
d
64
0.8
187
2.3
Virginia
7,787
2,328
29.9
2,405
30.9
2,103
27.0
481
6.2
468
6.0
Massachusetts
7,429
3,279
44.1
1,959
26.4
1,481
19.9
186
2.5
523
7.0
Connecticut
6,011
2,167
36.1
1,838
30.6
1,457
24.2
246
4.1
302
5.0
Maryland
5,897
1,941
32.9
1,614
27.4
918
15.6
66
1.1
1,358
23.0
Colorado
5,721
753
13.2
2,311
40.4
1,618
28.3
565
9.9
d
d
Minnesota
4,983
2,265
45.5
1,185
23.8
985
19.8
346
6.9
203
4.1
d—Data deleted to avoid disclosure of information about specific bonds. However, the data are included in the appropriate totals.
[1] Figure includes bonds issued during 2012 and 2013 and reported on the Form 8038-G.
[2] "Other purposes" refers to obligations for which a specific purpose either did not apply or was not clearly indicated on the Form 8038-G. It does not include specific purposes, such as public safety and
housing, that are not shown separately in this figure. See Table 2.
SOURCE: IRS, Statistics of Income Division,Tax-Exempt Bonds, November 2015.
Statistics of Income Bulletin
6
Spring 2016
Municipal Bonds, 2012–2013
top 5 States—California, New York, Texas, Pennsylvania, and
Illinois—issued about $118.1 billion (43.1 percent) of the total
proceeds during the 2-year period. According to 2013 Census
estimates, these 5 States accounted for almost 34.8 percent of
the total U.S. population.15
Figure H presents States with the largest net decreases and
net increases in the amount of new money long-term, tax-exempt private activity bonds for 2012 and 2013. For all States,
total new money long-term, tax-exempt private activity bond
proceeds decreased by approximately $5.7 billion (down 13.2
percent). Iowa accounted for the largest net decrease ($1.8 billion) in bond proceeds, while Colorado had the largest net increase ($949 million).
New money long-term, tax-exempt private activity bonds
issued for the top 15 States during 2012 and 2013 combined
accounted for 72.8 percent of the $80.8 billion total proceeds
(Figure I).16 Authorities in the following top 5 States issued
almost $30.1 billion (37.3 percent) of the total proceeds:
California (11.3 percent), New York (8.5 percent), Texas (8.0
percent), Pennsylvania (4.8 percent), and Indiana (4.7 percent).
According to 2013 Census estimates, these 5 States accounted
for almost 32.8 percent of the total U.S. population.
Figure H
States with Largest Decreases and Increases in Amount of New
Money Long-Term Tax-Exempt Private Activity Bonds, 2012 and
2013
[Money amounts are in millions of dollars]
2012
amount
2013
amount
Change in
amount
Percentage
change in
amount
(1)
(2)
(3)
(4)
43,259
37,545
-5,714
-13.2
Iowa
2,365
505
-1,860
-78.6
Virginia
2,627
796
-1,831
-69.7
Indiana
2,517
1,251
-1,266
-50.3
California
4,973
4,141
-832
-16.7
1,971
1,148
-823
-41.8
Colorado
787
1,736
949
120.6
New Jersey
716
1,265
549
76.7
New York
3,169
3,662
493
15.6
Massachusetts
1,597
2,027
430
26.9
666
1,038
372
55.9
State of issue
All States, total
States with decreases:
Ohio
States with increases:
Maryland
NOTE: Some States were excluded due to disclosure.
SOURCE: IRS, Statistics of Income Division,Tax-Exempt Bonds, November 2015.
Figure I
New Money Long-Term Tax-Exempt Private Activity Bond Proceeds, by Selected Bond Purpose, for Top 15 States, Ranked by Total
Issuances, 2012 and 2013 Combined [1]
[Money amounts are in millions of dollars]
Selected bond purpose
State of issue
Total
amount
(1)
Qualified section 501(c)(3)
nonhospital
Qualified hospital
facility
Qualified residential
rental facility
Amount
Percent
of State total
Amount
Percent
of State total
Amount
Percent
of State total
(2)
(3)
(4)
(5)
(6)
(7)
All States, total
80,804
27,893
34.5
18,285
22.6
11,968
California
9,114
3,936
43.2
d
d
2,631
14.8
28.9
New York
6,831
2,142
31.4
650
9.5
3,699
54.2
Texas
6,491
1,439
22.2
d
d
d
d
Pennsylvania
3,915
2,053
52.4
1,356
34.6
167
4.3
Indiana
3,768
544
14.4
d
d
107
2.8
Massachusetts
3,624
1,526
42.1
604
16.7
892
24.6
Florida
3,614
1,827
50.6
449
12.4
357
9.9
Virginia
3,423
d
d
760
22.2
253
7.4
4.3
Ohio
3,119
635
20.4
2,009
64.4
135
Iowa
2,870
386
13.4
316
11.0
d
d
Illinois
2,793
1,329
47.6
853
30.5
255
9.1
Wisconsin
2,587
1,222
47.2
813
31.4
d
d
Colorado
2,523
1,317
52.2
d
d
186
7.4
Washington
2,191
235
10.7
d
d
491
22.4
New Jersey
1,981
309
15.6
335
16.9
d
d
d—Data deleted to avoid disclosure of information about specific bonds. However, the data are included in the appropriate totals.
[1] Figure includes bonds issued during 2012 and 2013 and reported on the Form 8038.
SOURCE: IRS, Statistics of Income Division,Tax-Exempt Bonds, November 2015.
The resident population estimates for July 1, 2013, were produced by the U.S. Bureau of the Census and are available at http://factfinder.census.gov/faces/tableservices/jsf/pages/productview.
xhtml?src=bkmkxls.
Given that qualified private activity bond authority is generally allocated to States based on population, States with larger populations are more likely to appear in Figure I.
15
16
Statistics of Income Bulletin
7
Spring 2016
Municipal Bonds, 2012–2013
56.2 percent of proceeds refunded prior tax-exempt private activity bond issues.
Summary
Overall bond issuances fell from $496.0 billion in 2012 to
$422.4 billion in 2013. The majority of municipal bond issuances in 2012 and 2013 came from the nearly 25,000 tax-exempt governmental bonds issued in 2012 and 23,000 issued
in 2013. These governmental bonds raised a combined total of
almost $729.5 billion of proceeds for public projects pertaining
to schools, transportation, infrastructure, and utilities in 2012
and 2013. Of the combined 2012 and 2013 total of $607.7 billion for long-term governmental bonds issued, just over $273.7
billion (45 percent) of proceeds financed new projects, while
the remaining $334.0 billion (55 percent) of proceeds were
used to refund prior governmental bond issues. In addition,
approximately 5,700 tax-exempt private activity bonds were
issued in 2012 and 2013, for a total of almost $185.4 billion
in proceeds. These tax-exempt private activity bond proceeds
financed projects for qualified private facilities (such as residential rental facilities, single-family housing, and airports), as well
the facilities of IRC section 501(c)(3) organizations (hospitals
and private universities, for example). Just over 43.8 percent
of proceeds of long-term private activity bonds issued ($184.6
billion) were used to finance new projects, while the remaining
Data Sources and Limitations
SOI based the data presented in this article on the populations
of Forms 8038, 8038-G, and 8038-TC filed with the Internal
Revenue Service for bonds issued during Calendar Years 2012
and 2013. Tax-exempt bond data exclude returns filed for commercial paper transactions, as well as issues that are loans from
the proceeds of another tax-exempt bond issue, an arrangement known as pooled financing. Data for tax credit bonds and
specified tax credit bonds were compiled from Forms 8038-TC.
Data for credit payments were compiled from the population
of Forms 8038-CP filed for interest paid to bondholders during
Calendar Years 2009 through 2013.
Bond issuers were required to file Forms 8038, 8038-G, and
8038-TC by the 15th day of the second calendar month after the
close of the calendar quarter in which the bond was issued. The
filing deadline for Form 8038-CP varied based on the structure
of the interest payments. In an effort to include as many applicable returns for a particular year as possible, each of the respective study periods extended well beyond established filing
deadlines. The Forms 8038, 8038-G, and 8038-TC data include
Credit Payment to Issuers of Direct Payment Bonds
The American Recovery and Reinvestment Act (ARRA)
authorized direct payment bond issuance through the Build
America Bonds (BAB) and the Recovery Zone Economic
Development Bond (RZED) programs. These programs were
created to provide an incentive for State and local governments to undertake new capital projects during a period of
national recession. ARRA allowed issuers of these bonds to
elect (in lieu of issuing tax-credit bonds) to receive a direct refundable credit payment from the Federal government equal
to a percentage of the interest payments made to bondholders. The bond programs authorized by ARRA expired for new
issues on January 1, 2011; however, issuers of bonds created
under ARRA continue to request credit payments for previously issued bonds by filing Form 8038-CP, Return for Credit
Payments to Issuers of Qualified Bonds. Direct payment bond
issuers are required to file Form 8038-CP to request credit
payments as interest payments are made throughout the term
of the bond.
The Hiring Incentives to Restore Employment Act of 2010
(HIRE), enacted on March 18, 2010, extended the direct payment provision to certain issuers of specified tax credit bonds.
In lieu of issuing bonds with a tax credit to the bondholder,
issuers of specified tax credit bonds may elect to receive a
Federal direct payment on an interest payment date equal
to a certain percentage of the interest paid.17 Once an issuer
elected to treat a bond as a direct payment bond, the bondholders received taxable interest payments from the issuer,
instead of a tax credit.
Figure J includes credit payment requests to issuers of
direct payment bonds from 2009 through 2013. Since the inception of the Form 8038-CP, the number of returns, as well
as the amount of credit payment outlays, have steadily grown.
In 2009, only issuers of BABs and RZEDs were able to file
the Form 8038-CP. A small number of QZABs and QSCBs
were filed in 2010.18 As of December 31, 2010, no new BABs
or RZEDs were permitted, so the number and amount of
credit payment requests have remained relatively constant
from 2011 (nearly $3.8 billion) to 2013 (slightly more than
$3.9 billion). The number and amount of credit payment requests for BABs and RZEDs are anticipated to decrease over
time as bonds mature, issuers refund the debt, and as credit
payment requests decrease in amount due to principal reduction. In contrast, issuers of specified tax credit bonds may
still be eligible to issue bonds, so the number and amount of
credit payment outlays will likely continue to grow or remain
constant for several more years. The total amount of credit
17
Internal Revenue Notice 2010-35 states, “Section 301 of the Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, 124 Stat. 71 (2010) (the “HIRE Act”) added subsection
(f) to section 6431 of the Code, which authorizes issuers to irrevocably elect to receive Federal direct payments of allowances of refundable tax credits to subsidize a prescribed portion of
their borrowing costs instead of the Federal tax credits that otherwise would be allowed to holders of certain qualified tax credit bonds under section 54A. For more information regarding
the HIRE Act see Internal Revenue Notice 2010-35.
18
In general, bond issuers may structure debt repayment on their own terms; however, most issuers of municipal bonds opt to make debt repayments biannually. Because most issuers
of direct payment bonds choose to repay debt biannually, it is has been observed that accompanying Forms 8038-CP are filed shortly after issuance.
Statistics of Income Bulletin
8
Spring 2016
Municipal Bonds, 2012–2013
Credit Payment to Issuers of Direct Payment Bonds (Continued)
payments for BABs and RZEDs has remained near $4.0 billion from 2011 to 2013, while the credit payments for bonds
created under HIRE grew from nearly $472 million in 2011
to $812 million in 2013 (Figure J).19
Figure J1
Composition of Credit Payment Outlays to Issuers of Direct Payment Bonds Under ARRA, by Bond Type, 2009–2013 [1][2]
[Billions of dollars]
4
3
2
Recovery Zone Economic
Development Bonds
Build America Bonds
1
0
2009
2010
2011
2012
2013
Figure J2
Composition of Credit Payment Outlays to Issuers of Direct Payment Bonds Under ARRA, by Bond Type, 2009–2013 [1][2]
[Millions of dollars]
900
800
700
600
500
New Clean Renewable Energy Bonds
Qualified Energy Conservation Bonds
Qualified Zone Academy Bonds
Qualified School Construction Bonds
400
300
200
100
0
2010
2011
2012
2013
[1] Form 8038-CP, Return for Credit Payment to Issuers of Qualified Bonds , is used by issuers of Build America bonds, recovery zone economic development bonds, and specified tax credit bonds who
elect to receive a direct payment from the Federal Government equal to a percentage of the interest payments on these bonds. Specifically, issuers of Build America bonds receive a credit payment equal to
35 percent of interest payable, and issuers of recovery zone economic development bonds receive a credit payment equal to 45 percent of interest payable. For specified tax credit bonds the amount of
refundable credit payments for qualified zone academy bonds and qualified school construction bonds is the lesser of 100 percent of the interest payable or 100 percent of the amount of interest determined
at the applicable tax credit rate under Internal Revenue Code section 54A(b)(3). The amount of refundable credit payments for new clean renewable energy bonds and qualified energy conservation bonds
is the lesser of 70 percent of the interest payable or 70 percent of the amount of interest determined at the applicable tax credit rate under section 54A(b)(3).
[2] Credit payment outlays are not subject to sequestration reductions in 2012. Credit payment outlays in 2013 are subject to sequestration reductions; however, the data shown for 2013 do not reflect the
rate reduction. This is due to the fact that preparers are instructed to complete the Form 8038-CP in the manner provided by the Form 8038-CP Instructions. For more information see:
http://www.irs.gov/Tax-Exempt-Bonds/Effect-of-Sequestration-on-Certain-State-and-Local-Government-Filers-of-Form-8038CP.
NOTE: Detail may not add to totals because of rounding.
SOURCE: IRS, Statistics of Income Division,Tax-Exempt Bonds, November 2015.
19
Issuers of BABs were not subject to volume cap limitations. Issuers of RZEDs, as well as all direct payment tax credit bonds, were subject to volume cap limitations. Issuers of QSCBs
were allocated $11 billion for each of Calendar Years 2009 and 2010; unused cap could be carried forward. Issuers of QZABs were allocated $1.4 billion for each of Calendar Years 2009
and 2010; unused cap could be carried forward up to 2 years. An additional $400 million was allocated to States for each of Calendar Years 2011 through 2013. Issuers of NEWCREBs were
allocated $800 million with no restriction on year of issuance and issuers of QECBs were allocated $3.2 billion total with no restriction on year of issuance.
Statistics of Income Bulletin
9
Spring 2016
Municipal Bonds, 2012–2013
returns processed from January 1, 2012, to April 30, 2015, for
bonds issued in 2012 and 2013. The Form 8038-CP data include returns processed from April 1, 2009, to July 1, 2015, for
interest paid during 2009 through 2013. Where possible, SOI
included data from amended returns filed and processed before
the cutoff, and excluded late-filed returns processed after the
respective cutoff dates.
During statistical processing, returns were subject to thorough testing and correction procedures to ensure data accuracy
and validity. SOI conducted additional checks to identify and
exclude duplicate returns, and wherever possible, edited returns
with incomplete information, mathematical errors, or other reporting anomalies to resolve internal inconsistencies. However,
in other cases, it was not possible to reconcile reporting discrepancies. Thus, some reporting and processing errors may remain.
listed in IRC sections 142(a)(1) through (15) and 142(k)). These
facilities include airports, docks and wharves, mass commuting
facilities, facilities for the furnishing of water, sewage facilities,
solid waste disposal facilities, and qualified residential rental
projects. They also include facilities for the local furnishing of
electric energy or gas, local district heating or cooling facilities,
qualified hazardous waste facilities, high-speed intercity rail facilities, environmental enhancements of hydroelectric generating facilities, and qualified public educational facilities.
Governmental bond—Any obligation that is not a private activity bond (see below) and is issued by a State or local government unit. The interest on a governmental bond is excluded
from gross income under IRC section 103.
The Hiring Incentives to Restore Employment Act of 2010
(HIRE)—Enacted on March 18, 2010, HIRE provides an option
for issuers of certain qualified tax credit bonds (“specified tax
credit bonds”) to irrevocably elect to issue the bonds with a
direct pay subsidy, in the same manner as the build America
bonds direct pay subsidy. The issuer of these bonds will receive an interest payment subsidy from the Federal government.
Bondholders will receive a taxable interest payment from the
issuer instead of a tax credit. For additional information, please
see Internal Revenue Notice 2010-35.
Private activity bond—Bond issue of which more than 10 percent of the proceeds is used for any private business use and
more than 10 percent of the payment of the principal or interest
is either secured by an interest in property to be used for private
business use (or payment for such property) or is derived from
payments for property (or borrowed money) used for a private
business use. A bond is also considered a private activity bond if
the amount of the proceeds used to make or finance loans (other
than loans described in IRC section 141(c)(2)) to persons other
than governmental units exceeds the lesser of 5 percent of the
proceeds or $5 million.
Qualified energy conservation bond—Any bond issued as
part of an issue if: (1) 100 percent of the available project proceeds of such issue are to be used for one or more qualified
conservation purposes; (2) the bond is issued by a State or local
government; and (3) the issuer designates such bond for purposes of IRC section 54D.
Issuers of qualified energy conservation bonds receive 70
percent of the interest paid to the borrower if the interest were
determined at the tax credit bond rate determined under section
54A(b)(3) for qualified tax credit bonds. If a qualified energy
conservation bond was issued as a specified tax credit bond issuers can receive the lesser of 70 percent of their interest payment or the amount of interest that would have been paid if the
interest rate was determined at the tax credit bond rate. For more
information on new, clean renewable energy bonds, see IRC
section 54D and Internal Revenue Notice 2010–35.
Qualified hospital bond—Type of qualified section 501(c)(3)
bond issue of which 95 percent or more of the net proceeds are
to be used to finance a hospital.
Qualified mortgage bond—Bond issue of which the proceeds
(except issuance costs and reasonably required reserves) are
used to provide financing assistance for single-family residential
Explanation of Selected Terms
American Recovery and Reinvestment Act of 2009 (ARRA)—
An act of the 111th Congress passed on February 17, 2009, in
response to the economic crisis. The passage of ARRA added to
the Internal Revenue Code (IRC) sections 54AA and 1400U-1
through 1400U-3. These IRC sections authorize State and local
governments to issue two general types of Build America Bonds,
recovery zone economic development bonds, and recovery zone
exempt facility bonds.
Build America Bond (BAB)—The American Recovery and
Reinvestment Act (ARRA) added IRC section 54AA to enable
State and local governments to issue bonds for authorized purposes to promote economic recovery and job creation. These
new types of bonds would be issued as taxable governmental
bonds with Federal subsidies to help offset a portion of issuers’ borrowing costs. The two distinct types of Build America
Bonds—Build America Bond tax credit and Build America
Bond direct payment subsidy—vary by the structure of Federal
subsidy. For Calendar Year 2010, issuers of Build America
Bonds were required to file IRS Form 8038-B, Information
Return for Build America Bonds and Recovery Zone Economic
Development Bonds.
Build America Bond direct payment bond—This type of BAB
provides a refundable credit payment to State or local governmental issuers in an amount equal to 35 percent of the total
coupon interest payable to investors.
Clean renewable energy bond (CREB)—A type of tax credit
bond used to finance eligible clean renewable energy projects,
which are subject to a national volume cap. Issuers of clean renewable energy bonds under IRC section 54 must be eligible
to apply for volume cap allocations. Clean renewable energy
bonds were first authorized under the Energy Tax Incentive
Act of 2005. For additional information, see Internal Revenue
Notice 2007–26.
Commercial paper—Commercial paper consists of shortterm notes that are continually rolled over. Maturities average
about 30 days but can extend up to 270 days. Many localities use
commercial paper to raise cash needed for current transactions.
Exempt facility bond—Bond issue of which 95 percent or more
of the net proceeds are used to finance a tax-exempt facility (as
Statistics of Income Bulletin
10
Spring 2016
Municipal Bonds, 2012–2013
property, and which meets the additional requirements in IRC
section 143. Bond proceeds can be applied toward the purchase,
improvement, or rehabilitation of owner-occupied residences,
as well as to finance qualified home-improvement loans.
Qualified school construction bond (QSCB)—A type of tax
credit bond, of which 100 percent of the bond proceeds are to be
used for construction, rehabilitation, repair, or land acquisition
in connection with a public school facility, which is issued by a
State or local government within the jurisdiction of where the
school is located. QSCBs are subject to a national volume cap
to be allocated by the Treasury among the States. The American
Recovery and Reinvestment Act of 2009 (ARRA) created IRC
section 54F authorizing QSCBs.
The Hiring Incentives to Restore Employment Act of 2010
allowed issuers of QSCBs to receive 100 percent of the interest
paid to the borrower if the interest were determined at the tax
credit bond rate determined under section 54A(b)(3) for qualified tax credit bonds. If a QSCB was issued as a specified tax
credit bond, issuers can receive the lesser of 100 percent of their
interest payment or the amount of interest that would have been
paid if the interest rate was determined at the tax credit bond
rate. For more information on QSCBs, see IRC section 54E and
Internal Revenue Notice 2010–35.
Qualified section 501(c)(3) bond—Bonds issued by State and
local governments to finance the activities of charitable organizations that are tax exempt under IRC section 501(c)(3). A bond
must meet the following conditions to be classified as a section
501(c)(3) bond: 1) all property financed by the net proceeds of
the bond issue is to be owned by a section 501(c)(3) organization or a governmental unit; and 2) the bond would not be
a private activity bond if section 501(c)(3) organizations were
treated as governmental units with respect to their activities that
are not related trades or businesses, and the private activity bond
definition was applied using a 5-percent threshold rather than a
10-percent threshold. The primary beneficiaries of these bonds
are private, nonprofit hospitals, colleges, and universities. A
qualified hospital bond issue is one in which 95 percent or more
of the net proceeds are to be used for a hospital.
Qualified zone academy bond (QZAB)—A type of tax credit
bond issued by a State or local government to finance certain
eligible public school purposes authorized under IRC section
54E. QZABs are subject to a national volume cap to be allocated
by the Treasury among the States.
Issuers of QZABs receive 100 percent of the interest paid
to the borrower if the interest were determined at the tax credit
bond rate determined under section 54A(b) (3) for qualified tax
credit bonds. If a QZAB was issued as a specified tax credit
bond, issuers can receive the lesser of 100 percent of their interest payment or the amount of interest that would have been paid
if the interest rate was determined at the tax credit bond rate. For
more information on QZABs, see IRC section 54E and Internal
Revenue Notice 2010–35.
Recovery zone bond—The American Recovery and
Reinvestment Act (ARRA) added IRC sections 1400U–1
Statistics of Income Bulletin
through 1400U–3 authorizing State and local governments to
issue recovery zone bonds. These bonds provide tax incentives
through lower borrowing costs and are intended to promote job
creation and economic recovery in targeted areas particularly
affected by employment declines. See Internal Revenue Notice
2009–50 for additional information.
Recovery zone economic development bond—Authorized
under IRC section 1400U–2, this type of bond provides for a
deeper Federal subsidy through a refundable credit payment
to State or local governmental issuers in an amount equal to
45 percent of the total coupon interest payable to investors. A
recovery zone economic development bond must be a Build
America Bond, the proceeds of which must be used for one or
more qualified economic development purposes. Recovery zone
economic development bonds are allocated under a $10-billion
national bond volume cap. For Calendar Year 2010, issuers of
recovery zone exempt facility bonds were required to file IRS
Form 8038-B, Information Return for Build America Bonds and
Recovery Zone Economic Development Bonds.
Recovery zone exempt facility bond—Authorized under IRC
section 1400U–3, which expanded the definition of the term
“exempt facility bond” to include any recovery zone facility
bond. A recovery zone exempt facility bond must be a qualified
private activity bond under IRC Section 142, the proceeds of
which may be used to finance certain “recovery zone property.”
Recovery zone exempt facility bonds are allocated under a
$15-billion national bond volume cap. For Calendar Year 2011,
issuers of recovery zone exempt facility bonds were required to
file IRS Form 8038, Information Return for Tax-Exempt Private
Activity Bonds.
Specified tax credit bonds—New clean renewable energy
bonds, qualified energy conservation bonds, qualified zone
academy bonds, and qualified school construction bonds are
specified tax credit bonds for purposes of IRC section 6431(f).
As a result of legislation in the HIRE Act, issuers of these bonds
can elect to receive the tax credit in the form of a direct payment subsidy instead of the bondholder (investor) receiving
the tax credits. Issuers are required to file IRS Form 8038-TC,
Information Return for Tax Credit Bonds and Specified Tax
Credit Bonds, to report such issues. See IRC section 54 and
Internal Revenue Notice 2010–35.
Tax credit bond—Tax credit bonds are not interest-bearing
obligations. The holder of a tax credit bond is generally allowed
an annual Federal income tax credit while the bond is outstanding. The amount of the credit is equal to the face amount of
the bond multiplied by the credit rate of the bond. Unique to
all other tax credit bonds, issuers of certain qualified tax credit
bonds, specifically new clean renewable energy bonds and
qualified energy conservation bonds, pay bondholders taxable
interest payments in addition to the tax credit the bondholder receives. For additional information, see Internal Revenue Notice
2009–15 and “Frequently Asked Questions on Qualified Tax
Credit Bonds and Specified Tax Credit Bonds” at http://www.
irs.gov/pub/irs-tege/tc_and_stcb_q-a._09-07-10_1.5.pdf.
11
Spring 2016
Municipal Bonds, 2012–2013
http//www.irs.gov/taxstats. Click on “Tax-Exempt Bonds.” The
direct link for SOI’s tax-exempt bond statistics is: http://www.
irs.gov/uac/SOI-Tax-Stats-Tax-Exempt-Bond-Statistics.
Additional Tabular Data on Tax Stats
SOI conducts annual studies on tax-exempt governmental bonds,
tax-exempt private activity bonds, and tax credit bonds using
data collected from Forms 8038, 8038-G, and 8038-TC filed
by bond issuers. Additional tax-exempt bond data, including
data for prior years, are available on SOI’s Tax Stats Webpage:
Statistics of Income Bulletin
Kelly Dauberman and Aaron Barnes are economists with the Special
Studies Special Projects Section. This data release was prepared under
the direction of Brian Raub, Chief.
12
Spring 2016
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.