private activity bond

(redirected from Private Activity Bonds)

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
Greenwich Investment Management (GIM) is an independent Registered Investment Advisor specializing in the analysis and management of tax-exempt private activity bonds.
Public Private Partnerships (P3s): "In order to encourage expanded private investment into infrastructure projects, the federal government could remove statutory and regulatory barriers to P3s, create competitive programs designed to leverage public dollars, and expand the use of private activity bonds."
One category of revenue bonds is qualified private activity bonds. These bonds finance a specified list of public-purpose projects where repayment comes from non-public sources such as airports, low-income housing, and colleges and hospitals.
Capital raised through sale of private activity bonds by regional banks would be used to issue loans during each appropriations cycle for projects located within a bank's geographic region.
Securities and Exchange Commission, affirmed the 'BBB' rating on the $460.9 million private activity bonds (PABs) issued by the New Jersey Economic Development Authority on behalf of NYNJ Link for the Goethals Bridge Replacement Project (the project).
For the 2018 and 2019 allocation cycles, a change was made to open $2 million each year to developers who had secured federally issued private activity bonds.
* Funding support for long-term projects by expanding and improving existing federal loan programs, creating a new loan guarantee program and expanding private activity bonds.
These provisions included the elimination of private activity bonds, simplification of the private foundation excise tax on net investment income, a special exception to the Johnson Amendment allowing 501(c)(3) organization to engage in political activities, the taxation of royalty income earned from the licensing of certain intangible property, and the elimination of certain employee tuition benefits.
The bill would permit state and local governments to access $5 billion in private activity bonds (PAB) for the financing of critical construction and infrastructure projects for qualified schools, hospitals, courthouses, universities, police stations, and prisons.
Additionally, we are very appreciative that the final agreement continues to allow colleges to finance infrastructure projects with private activity bonds. However, we continue to be concerned with the inclusion of provisions that will tax or constrain revenues previously used to support colleges and universities, as well as the students and communities they serve."
Under the Trump plan, broadband facilities in rural areas-including small cell and Wi-Fi attachments that are used to avoid environmental reviews required for large towers-would also be eligible to receive funding through Private Activity Bonds, which allow private projects to be pursued while benefiting from "the lower financing costs of tax-exempt municipal bonds."