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Advance Refunding Bonds

Bonds issued by state and local governments to refinance existing bonds before their maturity date, typically to take advantage of lower interest rates and save on borrowing costs. Before 2017, the interest on these bonds was exempt from federal taxes.

Internal Revenue Code of 1986

The main body of federal tax law in the United States, which governs income, corporate, estate, gift, and other federal taxes.

Public Law 115-97

Also known as the Tax Cuts and Jobs Act of 2017, this federal law made significant changes to the U.S. tax code, including the elimination of the federal tax exemption for advance refunding bonds.

Tax-exempt

Meaning that the income (such as interest from certain bonds) is not subject to federal income taxes.

Refinance

To replace an existing debt with a new debt, often to secure better terms like a lower interest rate or a different payment schedule.