Private activity bonds are popular tax-exempt securities that the muni community would like to see more of, a wish that may come true thanks to three separate bills currently tumbling in Congress.
"Following attacks during the 2017 Tax Cuts and Jobs Act and One, Big, Beautiful Bill Act, PABs seem to be having their moment in the sun with opportunities for expansion in the coming months," said Brett Bolton, vice president of federal legislative & regulatory policy for the Bond Market Association.
PABs are issued by state or local governments on behalf of private entities or nonprofits to finance public-use projects and are capped at the state level based on population.
"Lawmakers on the Hill followed DOT's request and introduced the TURBO act which work continues to attach to the current iteration of the surface transportation reauthorization package that is slowly making its way through Congress," said Bolton.
In February, the bipartisan Student Loan Bond Expansion Act of 2026, was introduced in the Senate and is designed to exempt qualified student loan from the volume cap and the alternative minimum tax.
According to analysis by Kutak Rock, "removing qualified student loan bonds from the alternative minimum tax preference rules could improve investor treatment and execution for that sector."
"The bill's pooled financing bond language also addresses technical concerns by clarifying that student borrowers are not treated as ultimate borrowers for purposes of the applicable pooled financing bond rules."
The Trump administration is proving to be fertile ground for expanding PABs, as opposed to trying to pass another major tax bill.
"For tax-exempt bond issuers and market participants, the common thread across these proposals is expansion of access to existing financing tools rather than retrenchment," said Kutak Rock.
"Each of these proposals remains in the legislative process and would require further congressional action before becoming law."
Congress is currently on recess until August 31, when the House returns for four days. Both houses are back on Capitol Hill starting Sept. 14 with a long to-do list prior to another month break in October for the mid-term elections.
Standalone bond or tax bills usually require a larger piece of legislation to provide a ride to full Congressional approval and the President's desk.
"The housing and student loan proposals could move as standalone measures or be incorporated into broader tax, housing or education legislation," said Kutak Rock.
"The TURBO Act may also be relevant to the surface transportation reauthorization process, where market participants are watching closely for changes to the PAB cap and related eligibility rules."
"These proposals are not yet law, but they are important indicators of continued congressional interest in tax-exempt bonds as a financing tool for housing affordability, student lending, transportation infrastructure and other public-purpose investments."
