Tax-Exempt Commercial Paper

DEFINITION of 'Tax-Exempt Commercial Paper'

An unsecured short-term loan, usually issued to finance short-term liabilities, that provides the debt holders (bondholders) some level of tax preference on the earnings from their debt investment at a local, state or federal level, or a combination thereof.

BREAKING DOWN 'Tax-Exempt Commercial Paper'

Universities often issue tax-exempt commercial papers to finance their operations with the help of the government. Governments help universities finance their operations because it is beneficial for the population to have post-secondary education. Although governments do not necessarily provide the universities with cash injections, they allow them to issue commercial papers that can earn tax-exempt gains for the people who buy them.

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RELATED FAQS
  1. How can retail investors invest in commercial paper?

    Find out how individual retail investors can purchase short-term commercial paper, but why it rarely makes good investment ... Read Answer >>
  2. Can a business ever be too small to issue commercial paper?

    See why market forces regulate the size of companies that issue commercial paper, even though there are no official regulations ... Read Answer >>
  3. What happens when a company defaults on its commercial paper obligations?

    Read about the possible consequences of a large corporation defaulting on its commercial paper obligations even though the ... Read Answer >>
  4. Can retail investors buy commercial paper?

    Find out whether retail investors buy commercial paper, and learn about the restrictions that often prevent individual investors ... Read Answer >>
  5. What is the difference between secured and unsecured debt?

    Understand the difference between secured and unsecured debt and how the reliability and trustworthiness of the issuing entity ... Read Answer >>
  6. Does working capital include short-term debt?

    Learn about a company's working capital and how short-term debt is considered part of current liabilities and is included ... Read Answer >>
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