Maxime & Improve the Use of Private Activity Bonds (PABs)
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Policy Area 1: Improving the Use of Private Activity Bonds (PABs)

To support this policy area, CDFA continuously works to improve the use of PABs through legislative improvements to the laws governing this important financing tool.

Industrial Development Bonds (IDBs) and 501(c)(3) Bonds are two particular areas of PABs that require immediate attention by Congress. To address outdated provisions related to IDBs and 501(c)(3) Bonds, CDFA has outlined the following priorities:

1. Renew the expanded definition of manufacturing for the use of IDBs to include tangible and intangible production

2. Renew the allowance for "functionally related and subordinate" components to be eligible for IDB financing

3. Expand 2% de minimus rule to financial institutions in relationship to IDBs

4. Increase the capital expenditure limitation for IDBs from $20 million to $40 million, or remove this limitation entirely

5. Eliminate the restriction on the use of accelerated depreciation by companies using IDB financing

6. Increase the maximum IDB bond size limitation from $10 million to $20 million

7. Expand and raise the small issuer limit for bank deductibility on IDBs and 501(c)(3) bonds to $30 million from $10 million and allow the limit to be applied to the borrower instead of the conduit issuer

8. Permanently authorize the elimination of the AMT for tax-exempt bonds

To address regulatory issues related to general Private Activity Bond (PAB) use, CDFA has outlined the following priorities:

1. Establish a strong working relationship with the Municipal Securities Rulemaking Board (MSRB) to enhance issuer and underwriter understanding of municipal bond financing

2. Establish a strong working relationship with the Internal Revenue Service Tax Exempt Bond (TEB) division to enhance issuer and underwriter understanding of municipal bond financing

3. Establish a strong working relationship with the U.S. Securities and Exchange Commission (SEC) to enhance issuer and underwriter understanding of municipal bond financing


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