Through its Private Activity Bond Program, the Iowa Finance Authority issues tax-exempt bonds on behalf of private entities or organizations for eligible purposes. These bonds help companies improve, expand and succeed.
In general, only bonds that serve a public purpose and are issued by state and local governments for the benefit of everyone are tax-exempt. However, there are some bonds that serve private interests that are allowed to be tax-exempt. These are bonds that, while they benefit private interests, also have substantial public benefits. Such bonds are called private activity bonds. These bonds are repaid from the revenues received by the private users.
The responsibility for repayment of the bonds rests with the applicant. Neither IFA nor the State of Iowa has any liability to repay the debt. IFA does not buy the bonds or sell the bonds. Applicants are responsible for finding an entity to purchase the bonds.
IRS regulations regarding qualified private activity bonds are detailed and stringent. Examples of private activity bonds that are tax-exempt include:
Some of these tax-exempt private activity bonds require an allocation of private activity bond cap and some have limits on the amount of tax-exempt bonds that can be issued. If you are applying for an affordable multifamily residential rental project using 4% Low-Income Housing Tax Credits, apply through the Tax Credit Application and Compliance (TAC) system.