private activity bond


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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.

private activity bond

A type of municipal bond issued when funds are to be used for a nonessential purpose. Private activity bonds pay taxable interest unless specifically exempted by the federal government. Private activities for which tax-exempt bonds may be issued include airports, electric and gas distribution systems, government mass transportation systems, hazardous waste disposal facilities, solid waste disposal facilities, and student loans. Small issues of industrial development revenue bonds and nonprofit college and hospital bonds are also permitted. Except for nonprofit college and hospital bonds, interest from tax-exempt private activity bonds is subject to the alternative minimum tax. Also called nonessential function bond, private purpose municipal bond. Compare essential function bond. See also 501(c)(3) bond, municipal bond, small-issue bond.
References in periodicals archive ?
9 billion in private activity bond proceeds in 2011, almost all (98.
would remove issuances of private activity bonds for water and wastewater projects from the annual state volume caps, allowing local communities to leverage private capital markets in combination with other financial mechanisms to finance water and wastewater infrastructure projects.
If a bond issuance passes both of these subparts, it will be considered a private activity bond.
Specifically, Code Section 145(a) provides that you will not create a private activity bond if at least 95 percent of the net proceeds are spent for activities which are not part of an unrelated trade or business.
However, the court noted that there is no requirement that the qualified private activity bond finance a typical governmental function, such as highway construction or police protection.
6 percent) in new money long-term, tax-exempt private activity bond proceeds, which was due to increases in Qualified Gulf Opportunity Zone exempt facility bonds and Gulf Opportunity Zone mortgage bonds.
This report (1) describes recent trends in tax exempt bonds, (2) provides information on the types of facilities financed with tax-exempt bonds, and (3) discusses borrowing costs considering the methods of selling bonds and compares issuance costs paid from bond proceeds for governmental and qualified private activity bonds.
The data presented in this article are based on the populations of Forms 8038, Information Return for Tax-Exempt Private Activity Bond Issues, and Forms 8038-G, Information Return for Tax-Exempt Governmental Obligations, filed with the Internal Revenue Service (IRS) for bonds issued during Calendar Year 2009.
According to the survey, about half of all private activity bond authority is now devoted to housing.
Tenders are invited for Construction to Permanent Private Activity Bond Financing and/or Limited Equity Partner(s)
Since the private activity bond proceeds are used by one or more private entities, the debt service is paid or secured by one or more private entities.