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Abstract: 

The author has filed a patent on a financing structure intended as a replacement for municipal bond insurance. The underlying concept is simple: If an issuer fails to pay, a holder receives equivalent tax credits in lieu of payment. It is a structure designed to produce AAA credit enhancement without counterparty exposure or credit risk. This article explores the economic rationale and the legal underpinnings of using this tax-offset mechanism as an insurance backstop.

Keywords: tax credits; tax offsets; sovereign nullification; tax-directed bonds; credit quality; bankruptcy

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