California Matters

State Tax Exemption

Section 3 of Article 13 of the California Constitution states that, among other things, bonds issued by the State of California or a local government in the State of California are exempt from property taxation.

Section 26(b) of Article 13 of the California Constitution states that interest on bonds issued by the State of California or a local government in the State of California is exempt from taxes on income.

For basic qualified 501(c)(3) bonds issued by, e.g., a joint powers authority, bond counsel’s opinion might therefore state:  In the opinion of Bond Counsel, interest on the Bonds is exempt from State of California personal income taxes.  There may not be a need to refer to property taxation in most cases.

Special statutory authority may exist separate from the California Constitution for other types of bonds, in which case it would be prudent to refer to the exact wording of the exemption provided in the relevant statutes.

References

Article 13 of the Constitution of the State of California: http://www.leginfo.ca.gov/.const/.article_13