Private Activity Bonds
A PAB is a type of municipal bond that is issued by a government entity where more than 10 percent of the proceeds are used by a private business and more than 10 percent of the debt service is secured by a private business. In general, the interest on PABs cannot be tax-exempt unless the transaction meets certain criteria established in tax law. PABs are generally used in the context of public-private partnership transactions, for certain housing and economic development purposes, and other qualified uses.