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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120% Rule
Section 147(b) of the Code states that Private Activity Bonds are not Tax-Exempt Bonds if the Weighted Average Maturity of the Bond Issue exceeds 120% of the average reasonably expected economic Useful Life of the facilities financed with the Bond proceeds.
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Learn more about how various aspects of tax law intersect with municipal securities.
See Also
Weighted Average Maturity
Generally, the weighted average maturity of a bond issue is the sum of the product of the issue price of each maturity of the bond issue multiplied by the number of years from the closing until that maturity date divided by the issue price of the entire bond issue.
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Arbitrage Bonds
Tax-exempt bonds violating yield restrictions imposed by Section 148 of the Internal Revenue Code (IRC) and Treasury Regulations promulgated thereunder.