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.

Dive Deeper on Tax Issues

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

See Also


Evidence of the borrowing by an issuer and a debt instrument for tax purposes.

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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Bond Insurer

A company that issues the bond insurance policy for a bond issue.