Tax Credit Bonds

The American Recovery and Reinvestment Tax Act of 2009 authorized the issuance of a new type of tax credit bond called the "qualified school construction bond (QSCB)." These bonds provide a federal subsidy to assist state and local governments in financing expenses of public school construction, rehabilitation, and repairs. The QSCBs are issued by a state or local government within the jurisdiction of which the school is located.

Federal treatment
A taxpayer holding a tax credit bond is allowed a credit against federal income tax equivalent to the interest that the bond would otherwise pay. The bondholder must include the amount of the credit in federal gross income and treat it as interest income.

Wisconsin treatment
Is the amount that is taxable for federal purposes as interest income also taxable for Wisconsin?

Yes. Wisconsin law provides for the taxation of interest from state and local bonds. QSCBs are issued by state and local governments and are therefore taxable to Wisconsin.

Last updated March 5, 2010