Since the passage of the Tax Reform Act of 1986
(the "Tax Act"), federal law has limited tax-exempt financing of private
activities. Private activity bonds are those bonds that meet any of the
following tests: 1) Private Business Use Test - more than 10% of the proceeds
are to be used for any private business use; 2) Private Security or Payment
Test - payment on principal or interest of more than 10% of the proceeds is to
be directly or indirectly secured by, or payments are to be derived from a
private business use; and 3) Private Loan Financing Test - proceeds are to be
used to make or finance loans to persons other than governmental units.
Chapter 1372 of the Texas Government Code
mandates the allocation process for the state of Texas. The Private Activity
Bond Allocation Program regulates the volume ceiling and monitors the amount of
demand and the use of private activity bonds each year. The Texas Bond Review
Board has administered this program since January 1, 1992.
Questions concerning the Private Activity Bond Allocation Program should be
directed to the