Private Activity Bond

[Strongsilence-CPA]

Line 13 of 1099-Div shows specified private activity bond interest dividends.  I've always reported this as non-taxable for regular tax and have never looked deeper until I reviewed a return (prepared by a RTRP in Ohio) who listed this on Schedule B.  The guidance is shown below and I don't read it to mean that Line 13 is anything other than qualified. 

IRS Pub 550

Private activity bonds. Interest on a private activity bond that is not a qualified bond (defined below) is taxable. Generally, a private activity bond is part of a state or local government bond issue that meets both the following requirements.

• 1. More than 10% of the proceeds of the issue is to be used for a private business use.

• 2. More than 10% of the payment of the principal or interest is:

  • a. Secured by an interest in property to be used for a private business use (or payments for this property), or

  • b. Derived from payments for property (or borrowed money) used for a private business use.

Also, a bond generally is considered a private activity bond if the proceeds to be used to make or finance loans to persons other than government units is more than 5% of the proceeds or $5 million (whichever is less).

[Accountant-Man]

PAB interest only matters for AMT, and since so very few TPs are subject to AMT anymore, it really has very little use.