Private activity bond

In general, a private activity bond is a bond issued by or on behalf of a local or state government for the purpose of financing the project of a private user.

Application within the United States

Section 141 of the Internal [Revenue Code] provides that the term private activity bond means any bond issued as part of an issue which meets:
Under Treasury Regulation section 1.141-2, an interest on a private activity bond is not excludable from gross income under section 103 of the Internal Revenue Code unless the bond is a qualified bond. Interest from private activity bonds became subject to the Alternative Minimum Tax after the Tax [Reform Act of 1986]. All things equal, yields on private activity bonds are higher due to this tax treatment.