What is the maximum percentage of bond proceeds that can be used for private business use according to the Private Business Use Test?

Prepare for the CPFO Debt Management Exam. Study effectively with flashcards and multiple choice questions, complete with hints and detailed explanations. Get exam-ready!

The maximum percentage of bond proceeds that can be used for private business use according to the Private Business Use Test is 10%. This threshold is established to ensure that tax-advantaged bonds, which are often issued by governmental entities, do not disproportionately benefit private businesses in ways that could undermine the public purpose for which the bonds were issued.

If more than 10% of the proceeds are utilized for private business use, the bonds could lose their tax-exempt status, which is a critical consideration for both issuers and investors. Maintaining compliance with this percentage is crucial to preserving the favorable tax treatment of the bonds, ensuring that they serve the public interest effectively.

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