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
The Private Loan Financing Test is designed to prohibit governmental units from providing Governmental Bond-financed loans to non-governmental persons. A Bond Issue satisfies the Private Loan Financing Test (and, therefore, consists of Private Activity Bonds) if proceeds exceeding the lesser of $5 million or 5% of the proceeds of the Bond Issue are to be used directly or indirectly to finance loans to one or more non-governmental persons.
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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).
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Par Value
The stated or face amount of a bond.