Decoding IRC Section 144 and Tax-Exempt Bond Benefits

A small issue bond is one type of conduit bond, referred to as a private activity bond, which provides a loan to a nongovernmental third-party borrower for use in developing projects that benefit the public. Qualified small issue bonds are tax-exempt bonds issued as private activity bonds permitted under I.R.C. § 144(a) if the aggregate authorized face amount is $1 million or less. At least 95% of the net proceeds of the bonds must be committed to be used for the acquisition, construction, or improvement of land or property of a character subject to the allowance for depreciation in connection with a "manufacturing facility" (or to redeem part or all a prior bond issue which was itself a qualified small issue bond).

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