The taxable debt instruments are part of the federal stimulus plan. The bond portfolio will invest mostly in the bonds, which were developed under the American Recovery and Reinvestment Act of 2009, which went into place in February, according to a Securities and Exchange Commission (SEC) filing, states Daisy Maxey of The Wall Street Journal.
Additionally, it will invest in securities that make up the Merrill Lynch Build America Bond Index, designed to track the performance of dollar-denominated Build America Bonds issued by U.S. states and territories in the U.S. market.
From a tax perspective, these bonds are a bit different than your run-of-the-mill municipal bonds. The interest received on Build America Bonds is generally subject to federal and state income tax. However, in states where most muni bonds are exempt from state taxes, Build America Bonds are, too.
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Kevin Grewal contributed to this article.
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