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, and 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.  Effective January 1, 2012, this dollar volume limitation (also referred to by such terms as “State Ceiling“, “volume ceiling“, or “cap”) is the greater of $95.00 per capita of the state’s resident population or $277.820 million.  For calendar year 2012, Oklahoma’s volume ceiling is $360,193,260.  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.