in Mississippi

purchase obligation (Code, §§ 31-8-1 through 31-8-13). The issuance of such certificates is
advantageous for larger issues.
BANK LOANS
Warning: Some issuers continue to think that more informal bank loans are somehow not subject
to state law requirements for bonds. However, state statutes provide that no interest-bearing
indebtedness may be incurred by any county unless the authority for incurring the debt is
specifically provided for by statute (Code, § 19-9-31). Bank loans, like any other county debt,
must be authorized, and must follow the requirements of such authority. In order for interest on
such loans to qualify for tax-exempt status, those obligations must comply with requirements
generally applicable to municipal bonds – including filing the required form with the Internal
Revenue Service (IRS). In addition, in order for the bank to benefit from the tax-exempt status of
such obligations, they must also be designated as “qualified tax-exempt obligations.”
LOCAL AND PRIVATE LEGISLATION
A substantial number of county bond issues are authorized by local and private legislation, which
is legislation that applies only to a particular locality or entity. This may be appropriate where
the circumstances are somewhat unique, or where there is a good idea that has not yet been
enacted into law.
TAX CONSIDERATIONS AND OVERVIEW
There are both federal and state tax law considerations.
Federal Tax Law
This is one of the most difficult and complex areas pertaining to municipal bonds. The arbitrage
regulations alone are hundreds of pages. We must be content here to make a few important
points.
1. All municipal bonds (includes bonds of a county) do not qualify for federal tax
exemption. Even if the bond issue is for a qualifying purpose, the bonds will not be taxexempt
unless a filing is made with the IRS (among other requirements). Special
consequences pertain to the types of bonds referred to as private activity bonds, working
capital bonds, and arbitrage bonds.
2. Private use of a type or to an extent not allowed by the Internal Revenue Code can cause
interest on bonds to be taxable. Private activity bonds may qualify for tax exemption
under requirements pertaining to bonds for manufacturing purposes, for exempt facility
bonds, for 501(c)(3) bonds, and for certain other favored categories.
It should be noted that what some people think of as public purpose bonds, the IRS thinks
of as private activity bonds (industrial parks, facilities with non-qualifying management
contracts, facilities with more than allowed private use). Use in excess of the allowed
percentages by either Georgia Pacific, the Boy Scouts, or the federal government
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