Private Activity Bonds (PABs) are issued by government entities to fund the construction of privately-owned projects. These bonds are issued for projects that serve the public or that benefit the common good. While the government issues the PAB, it generally does not pledge its credit or guarantee repayment. It is the private user who is receiving the financing from the PAB to develop the project that is responsible for repaying the PABs.
Private Activity Bonds can result in significant tax savings because they make it possible for projects to be financed on a tax-exempt basis. However, entities who receive PABs have to comply with state requirements as well as with rules and regulations set forth by the Internal Revenue Service (IRS). Among other things, the rules limit the types of projects, facilities and equipment that can be financed through the use of PABs.
The experienced attorneys at Lotzar Law Firm, P.C. work with clients on all matters related to Private Activity Bonds in Scottsdale and throughout Arizona, Texas, and Utah. We can help you to determine if your project would qualify for this type of tax-exempt financing and we can assist with the process of getting the bonds issued and complying with ongoing requirements. Call or contact us online today to speak with a member of our legal team to learn more.
Projects, Facilities and Equipment Financing with Private Activity Bonds
Under federal law, Private Activity Bonds may be used to finance:
- Water-providing facilities.
- Facilities that furnish gas.
- Facilities that furnish electrical energy.
- Airports.
- Mass-commuting facilities.
- High-speed railway facilities that facilitate intercity travel.
- Plants for disposal and treatment of solid waste.
- Plants for storage or disposal of hazardous materials.
- Docks.
- Residential rental facilities.
- Heating facilities serving local districts.
- Cooling facilities serving local districts.
- The enhancement of facilities generating hydro-electric.
- Manufacturing facilities (limited to small issue bonds with a maximum value of $20 million).
Mortgage Revenue and Student Loan Bonds may also be available, as well as Qualified Development Bonds. For all issued bonds, 95% or more of the net proceeds must be used for an exempt purpose or for an exempt facility.
Arizona law limits the issuance of Private Activity Bonds to:
- Facilities for manufacturing, processing or assembling agricultural products or manufactured products.
- Commercial enterprises that store, warehouse or distribute products of agriculture, mining or industry.
- Buildings on the national registrar of historic places that will be used for offices
- Health care institutions as defined in Arizona Revised Statutes Section 36-401
- Certain residential real property projects including the repair of single-family dwelling units
- Convention and trade show facilities
- Airports, wharves, mass commuting facilities, docks and parking facilities
- Sewage or solid waste disposal facilities
- Facilities to furnish gas, electricity or water
- Industrial park facilities
- Facilities designed for the control of air or water pollution
- Certain educational institutions
- Research and development facilities
- Certain commercial enterprises
- Child welfare agencies
- Museums operated by non-profits or certain other facilities owned by non-profits
- Certain transportation facilities
- Correctional facilities for the Arizona Department of Corrections
Getting Legal Help with Private Activity Bonds in Scottsdale
While these projects can be financed through PABs, not all are tax-exempt. An experienced attorney at Lotzar Law Firm, P.C. can help you to determine if your project is eligible for a Private Activity Bond and what the tax treatment will be. Call or contact us online today to speak with a member of our legal team and learn more.
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