Bond
Evidence of the borrowing by an issuer and a debt instrument for tax purposes.
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Governmental (Purpose) Bonds
Bonds issued by an Issuer to finance all or a portion of its own project. Unlike Private Activity Bonds, Governmental Bonds or Governmental Purpose Bonds are not defined in the Code but are terms commonly used to refer to municipal Bonds that are not Private Activity Bonds. Governmental Bonds do not satisfy both the Private Business Tests and the Private Loan Financing Test.
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See Also
Private Business Use (PBU) and Tests
Any use of Bond proceeds in a trade or business carried on by a person other than a governmental unit. The private business tests are used in part to establish whether a bond is a private activity bond (PAB).
In Contrast With
Private Activity Bond (PAB)
The term used in the Code to describe any bond issued as part of a bond issue that meets both of the private business tests or meets the private loan financing test.
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Private Loan Financing Test
One of the tests used in establishing whether a bond is a private activity bond (PAB) for tax purposes. The private loan financing test specifically determines whether more than $5 million or 5% of the proceeds of a bond issuer are used to directly or indirectly finance loans to one or more non-governmental persons.