|Private Activity Bonds|
Private Activity Bond Allocation Program
Private activity bonds under the Internal Revenue Code (the “Code”) are described generally as any bond: (1) of which more than 10% of the proceeds is to be used in a trade or business of any person or persons other than a governmental unit or which is to be directly or indirectly repaid, or secured by revenues from a private trade or business; and (2) in which an amount exceeding the lesser of 5% or $5 million of the proceeds is to be used for loans to any person or persons other than a governmental unit.
Most private activity bonds must be sold on a taxable basis. However, the Code grants exceptions when certain bonds (“Qualified Private Activity Bonds”) can be sold on a tax-exempt basis. Such bonds, with certain exceptions, are subject to the federal alternative minimum tax. Some categories of Qualified Private Activity Bonds include Small-Issue Industrial Development Revenue Bonds (small manufacturing facilities, some loans to beginning farmer); Mortgage Revenue Bonds (housing); Student Loan Revenue Bonds; Exempt Facilities Bonds (private water, wastewater, multifamily housing, etc.); and other purposes defined by the Code.
The Code also imposes a limitation on the amount of Qualified Private Activity Bonds which may be issued by a state in any calendar year (see Rev. Proc. 2013-35). Effective January 1, 2015, this dollar volume limitation (also referred to by such terms as “State Ceiling“, “volume ceiling“, or “cap”) is the greater of $100.00 per capita of the state’s resident population or $301,515,000. For calendar year 2015, Oklahoma’s volume ceiling is $387,805,100. In Oklahoma, the Private Activity Bond Allocation Act provides for the distribution of the State’s Volume Ceiling and is administered by the State Bond Advisor’s Office. For detail on the availability of cap, by pool, please click here.