A case questioning the legality of a Kentucky law that exempts the interest on most municipal bonds from being taxed by the state -- when the investor is a resident of the state -- could have far-ranging effects for the $2.3 trillion municipal-bond market.

This week, Kentucky's Supreme Court declined to review an appeals-court decision that found it to be unconstitutional for the state to tax only out-of-state bonds. A Chicago couple -- George and Catherine Davis -- brought the case, and similar cases are reportedly on the docket in Arizona and North Carolina. Most other states with a state income tax have rules similar to Kentucky's, arguing that the tax break incentivizes investors to keep their money local.

Register or login for access to this item and much more

All Accounting Today content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access