|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, 2014, 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 $296,825,000. For calendar year 2014, Oklahoma’s volume ceiling is $385,056,800. 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.