Tax Exempt Commercial Paper

Tax-free and short term debt issued on behalf of an organization. This tool is backed by federal or state government units. Tax-exempt commercial paper are usually issued to finance short term liabilities that provides debt holders tax preference on their debt earnings. Tax-Exempt Commercial is also used as a form of subsidy from the government to corporations or institutions such as universities. This policy of providing tax-exempt commercial paper encourages investors to front money knowing that the earning on debt will be tax deductible.