Private-purpose bond


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Private-purpose bond

A municipal bond allowing more than 10% of the proceeds go to private activities.

Private Activity Bond

A tax-exempt municipal bond in which a local government entity is seeking to raise money for a private company. A municipality issues a private activity bond when it wishes to attract a business and the jobs it brings to the area, especially when the business may be otherwise unable to obtain financing for the project. The municipality issuing the bond must be able to prove that a public benefit derives from the private activity bond in order to qualify for tax-exempt status. Private activity bonds generally are not guaranteed by the revenue of the municipality.