As part of its economic response to the COVID-19 pandemic, yesterday the Government passed a ‘temporary safe harbour’ insolvency measure^[1].

In the aftermath of recent municipal bankruptcies in which issuers proposed and/or implemented bankruptcy plans involving partial discharges of the issuer’s payment obligation on insured bonds, there has been increased focus on whether municipal bond interest paid by a bond insurer after the bankruptcy plan’s effective date continues to be tax-exempt.