General FAQs

Program Specific FAQs

What does it mean when a bond or note is tax-exempt?

Tax-exempt means that, in the opinion of legal counsel, the interest you earn on the security is exempt from federal income taxes and from California personal income taxes. Investors should consult their brokers or other financial advisors to obtain comparisons between tax-exempt California municipal bonds or notes and taxable investment alternatives. Not all State bonds are tax-exempt. For additional information about the tax status of specific bonds, read the “Tax Matters” section of the official statement for that particular offering. Official statements may be obtained by contacting the Investor Relations Unit at (800) 900-3873.

What does it mean when a bond or note is taxable?

The interest earned on most GO bonds issued by the State of California is exempt from federal and state income tax, subject to rules relating to tax-exempt bonds set forth in the Internal Revenue Code. However, because of the programs funded by these bonds, it is not certain the bonds meet all of the tax rules so the State’s bond counsel will not provide its normal opinion that interest on these bonds is exempt from federal income taxation. The interest income on these bonds is still exempt from State of California personal income tax. Investors should consult their brokers or other financial advisors to obtain comparisons between taxable State GO bonds and tax-exempt investment alternatives. Read the “Tax Matters” section of the official statement for the bond sale to learn about the bonds’ tax status.

What are some benefits of purchasing municipal securities?

Municipal bonds and notes can be an important part of a diversified investment portfolio. Because bonds and notes typically have a predictable stream of payments of principal and interest, many people invest in them to preserve and increase their capital, or to receive dependable interest income. Additionally, the interest earned on municipal securities typically is exempt from federal and state income taxes.

It is important to remember that investment objectives, and the best strategies for achieving those objectives, depend on an individual investor’s particular circumstances. The tax advantage investors reap from tax-exempt securities will vary according to their income level.

What are the key features of State municipal securities?

What if I want to sell my municipal securities prior to maturity?

Most municipal securities may be sold prior to maturity with the assistance of a brokerage firm. If an investor sells a municipal security prior to maturity, he or she may receive more or less than the original price depending on prevailing market interest rates, supply and demand, and perceived credit quality of the securities, among other variables. In addition, investors should consult a tax advisor for any tax implications.

How do I compare tax-exempt municipal securities to taxable investment alternatives?