Series 50: Bank Qualified (BQ) Bonds

Bank Qualified (BQ) Bonds

Bank qualified (BQ) bonds are public interest bonds whose issuers offer no more than $10 million in tax-exempt bonds during a single calendar year. BQ bonds cannot be private activity bonds, however.

In addition to tax-free interest, BQ bonds offer an additional benefit for investors who are banks. Banks typically buy bonds with borrowed money. The interest paid on borrowed money is called carrying costs. Banks can deduct 80% of the carrying costs on BQ bonds. For example, if a bank borrows $20 million