WASHINGTON — Many states will likely be able to issue more tax-exempt private activity bonds next year with the increased per capita and minimum volume cap amounts the Internal Revenue Service has released for 2014.

The new numbers were included in IRS Revenue Procedure 2013-35, which contains inflation adjustments for a number of tax provisions.

States volume caps in 2014 will be the greater of, $100 per capita or $296.83 million. That's a jump from the $95 per capita or $291.88 million that was used to determine the caps for 2013.

The amount of states' volume caps will be determined when the U.S. Census Bureau releases new state population figures at the end of the year. The increases in the numbers in the formula mean that a state whose population didn't change in 2013 would see an increase in its volume cap for PABs.

States use the minimum cap provided by the IRS rather than the per capita amount when they have small populations. All states can carry forward unused amounts of PAB capacity for up to three years.

Revenue procedure 2013-35 also contained the numbers for the safe harbor rules for broker's fees for investments purchased for a yield-restricted defeasance escrow.

When state and local governments need to buy securities for an advance refunding escrow, they may use a broker to solicit bids for the securities. The yields on the escrow securities can't be higher than the yields of the refunding bonds.

The safe harbor rules lay out the broker fee amounts that are reasonable for an issuer to take into consideration when determining the yield on an investment. For 2014, an issuer can count as a qualified administrative cost for each bid the lesser of $38,000 or 0.2% of the amount of the investment. The issuer can pay a broker $4,000 and count that as a qualified administrative costs if 0.2% of the investment is less than that.

The safe harbor also provides that brokers fees are reasonable if the issuer "does not treat more than $108,000 in brokers' commissions or similar fees as qualified administrative costs for all guaranteed investment contracts and investments for yield restricted defeasance escrows purchased with gross proceeds of the issue."

The $38,000 maximum is higher than the $37,000 limit that issuers could take into consideration when determining the investment yield in 2013. The $108,000 limit for 2014 is higher than the $106,000 limit for this year.

Additionally, the IRS said that for bond years ending in 2014, an issuer that must rebate arbitrage to the federal government, can subtract $1,620 from what it owes to offset the costs of paying the professional to calculate the rebate. This figure is higher than the $1,590 that issuers could subtract for bond years ending in 2013.

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