Tax Anticipation Note (TAN)

What is ‘Tax Anticipation Note – TAN’

A short-term debt security issued by a state or local government to finance an immediate project that will be repaid with future tax collections. State and local governments use tax anticipation notes to borrow money, typically for one year or less and at a low interest rate, in order to finance a capital expenditure such as the construction of a road or school. The government then uses the following year’s tax revenue to repay the TANs.

Explaining ‘Tax Anticipation Note – TAN’

Tax anticipation note financing helps governments smooth out the ups and downs in their revenue cycles, if the timing of their receipts does not match the timing of their expenditures. TANs are one of several types of anticipation note that state and local governments can use; others include revenue anticipation notes, tax and revenue anticipation notes and bond anticipation notes. Tax anticipation notes are a type of municipal bond, so the interest earned from TANs is generally tax exempt for investors.

Further Reading

  • Taxes and corporate finance: A review – [PDF]
  • Stock market capitalization and financial integration in the Asia Pacific region – [PDF]
  • The economic geography of offshore incorporation in tax havens and offshore financial centres: The case of Chinese MNEs – [PDF]
  • Did the 2008 tax rebates stimulate spending? – [PDF]
  • Tax increment financing: A propensity score approach – [PDF]
  • Fiscal volatility shocks and economic activity – [PDF]
  • Seeking Local Government Financial Integrity Through Debt Ceilings, Tax Limitations, and Expenditure Limits: The New York City Fiscal Crisis, the Taxpayers' Revolt … – [PDF]
  • Uncovering patterns of state short-term debt financing – [PDF]