According to the Tax Cuts and Jobs Act of 2017, which type of bonds are prohibited for issuance?

The Tax Cuts and Jobs Act of 2017, signed into law on December 22, 2017, introduced significant changes to various tax provisions, including those that govern municipal bonds. One of the key changes was the prohibition of the issuance of tax-exempt advance refunding bonds.

Advance refunding bonds are used by municipalities to refinance existing bond obligations to take advantage of lower interest rates or other favorable financing conditions. However, under the new tax law, municipalities can no longer issue new tax-exempt bonds for the purpose of advance refunding existing tax-exempt bonds. This change was significant because it limited the financial flexibility that municipalities had in managing their debt and could result in increased costs in refinancing existing debt.

On the other hand, tax-exempt general obligation bonds, taxable revenue bonds, and tax-exempt municipal bonds are still permissible under the current law and have not been prohibited by the Tax Cuts and Jobs Act. Thus, the correct identification of what was prohibited aligns directly with this understanding of the law’s implications on bond issuances.