When must Tax Anticipation Notes (TANs) mature by?

Tax Anticipation Notes (TANs) are short-term debt instruments issued by municipalities to manage cash flow, particularly when there is a timing difference between when expenditures are due and when tax revenues are received. The maturity timeline for these notes is designed to align with the municipality's cash flow needs.

The correct answer highlights that TANs must mature within 120 days of the start of the succeeding fiscal year. This period allows municipalities to bridge the gap between the collection of taxes and the timing of necessary expenditures without needing a longer-term financial commitment. The 120-day timeframe is crucial as it aligns with the typical schedule for tax collection, ensuring that municipalities can cover operational costs until tax revenues are realized.

Understanding this maturity period is significant in municipal finance, as it ensures fiscal responsibility and adequate cash flow management within the constraints of limited borrowing timeframes. It is essential for municipal administrators to utilize TANs in a way that meets immediate financial needs while remaining compliant with the regulations governing their use.