Municipal Bond Forum
Fallout from possible changes to private activity bonds
We’re waiting with bated breath for your reading of the Senate’s version of the tax overhaul bill passed last week. Did the Senate version eliminate or reduce the exemption for private activity bonds? Will existing PABs be grandfathered or will any new rule apply to them, too? Specifically, what kind of bonds are effected? When we buy bonds, what do we look for to determine if they’re PABs?
James A. Klotz responds:
No need for bated breath.
The Senate version did not eliminate or reduce the exemption for private activity bonds. The House bill eliminates all PABs.
If PABs are reduced or eliminated, it will only apply to new issuance. Outstanding issues will remain tax-free.
It is not clear specifically which bonds would be affected in the House bill but clearly would include financing for hospitals, stadiums, highways, bridges and other infrastructure projects.
If the Senate’s version is enacted, you will not require any more information than you do today to select your bonds.
If private activity bonds are eliminated, “taxable” will be included in the description.
As we said in our most recent article (“Attacking Certain Munis Imperils Infrastructure Goals”), the issue is far from settled, so stay tuned.
Do you have specific criteria for bonds you’re looking for? Let us know and we’ll e-mail you bonds that fit your needs. There is no charge for this service.
The responses provided in this forum are meant to address specific questions posed by investors about their municipal bonds and to provide market insight for our general audience. Please note, your investments, objectives, results and experience may differ significantly. Our answers and any potential strategies discussed should not be construed as a solicitation to buy nor sell any security or investment product. All investing entails risk.