Original Issue Discount is the discount from par value at the time that a municipal bond is issued by a municipality. That is, the original issue discount is the difference between the redemption price when the bond matures and the issue price that investors must pay now.
For example, a municipality might issue a $100 face value bond at $80, representing a 20% original issue discount. The municipality might do this in order to justify a lower interest rate or even issue a zero-coupon bond, although the discount itself is taxable in most cases.