Private Purpose Municipal Bond

private purpose municipal bond

See private activity bond.

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Private Purpose Municipal Bond

A tax-exempt municipal bond that a local government entity uses to raise money for a private company. A municipality issues a private purpose municipal 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 bond in order to qualify for tax-exempt status. Private purpose municipal bonds generally are not guaranteed by the revenue of the municipality. They are also called private activity bonds.