Overview of a Private Activity Bond

A private activity bond is a special type of bond that is issued by local and state governments. This type of bond can be purchased by individual investors and is generally issued to fund a specific project for the good of the community. Here are the basics of private activity bonds and how they work.

Private Activity Bonds

These bonds are issued by the local government but they are generally used to fund private projects. This is a type of municipal bond. One of the big advantages of investing in this type of bond is that the interest that you earn is not taxable. Generally, the interest on these bonds is minimal, but by the time you calculate in the tax savings, it can be an attractive investment option.

Public Projects

Generally, this type of bond is used to fund projects that can benefit the public. For example, this type of bond might be issued in order to raise funds for a stadium for a professional sports team. Building a stadium is not necessarily the responsibility of a local government, but having a professional sports team in town can benefit the economy of the city overall.