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.  

Dive Deeper on Tax Issues

Learn more about how various aspects of tax law intersect with municipal securities.

See Also

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.

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.

Hudson Yards Rail Yards

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Serial Bonds

Maturities of a bond issue which mature in consecutive years or other shorter periods.