Private Activity Bonds (PABs) are tax-exempt bonds issued by public entities to provide low-cost financing for private projects that serve a public purpose. Federal tax law imposes a number of restrictions and requirements on the issuance of Private Activity Bonds, among which is a "volume cap" at the state level that limits the amount of PABs that can be issued each year for non-charitable organizations. Each state's "volume cap" is calculated according to a formula established by federal tax law: a certain dollar amount per person (determined each year by the IRS) multiplied by the state's official population (as estimated by the Census Bureau). In addition, unused volume cap may be carried forward for future use; carry-forward amounts expire after three years.

The Commonwealth's role in the issuance of Private Activity Bonds involves two primary processes: "TEFRA" approvals and the annual reservation of volume cap.

TEFRA Approvals . Charitable organizations and public entities which receive volume cap reservations issue Private Activity Bonds to finance specific projects. Federal tax law requires that these bond issues conform to certain procedural requirements in order to be issued on a tax-exempt basis (more information about these restrictions can be found in IRS publication 4078, Tax-Exempt Private Activity Bonds). One of the federal requirements is that the bond issue must be approved by an appropriate governmental entity - often an elected official following a public hearing with reasonable public notice.

In Massachusetts, ANF coordinates the TEFRA approval process on the Governor's behalf. Bond issuing entities must submit a packet of information to A&F at least one week prior to the sale of bonds; this packet should generally include:

  • description of the proposed bond issue and amount of volume cap needed;
  • description of the project being financed, including location, purpose, total cost, and other sources of funding;
  • description of the need for the project and its anticipated public benefits; and
  • certified copies of required board approvals and notices of public hearings.

ANF reviews the information packet and makes a recommendation to the Governor regarding TEFRA approval; if volume cap is needed for the bond issue, ANF also checks the requested amount against the issuer's volume cap reservation for that calendar year. The Governor signs a TEFRA approval or rejection letter, which ANF then forwards to the requesting entity. If the TEFRA request has been approved, ANF also includes an allocation of any necessary volume cap. After the bond issue has closed, the issuing entity then sends ANF a confirmation of the closing and the amount of volume cap used.

ANF keeps a master list of all TEFRA requests, approvals granted, and volume cap allocated for each calendar year. TEFRA hearing notices received by A&F can be found in the list on the right side of this page. A list of approved projects for the current calendar year can be found below:

Annual Reservations . Massachusetts state law grants ANF the authority to allocate volume cap to non-charitable purpose projects financed by independent public entities. The entities that typically receive volume cap allocations are the Massachusetts Educational Financing Authority (MEFA), the Massachusetts Housing Finance Agency (MassHousing), and the Massachusetts Development Finance Agency (MassDevelopment). The historical allocation of volume cap to these entities for the past five years, including unused cap carried forward from prior years, is as follows:

Annual Allocations   






























At the start of 2007, ANF announced a new volume cap allocation process:
Independent public entities apply for annual reservations

January/Early February

Public hearing: presentations by A&F and requesting entities; public testimony

Mid February

Entities interview with panel of administration officials

Late February

Panel requests additional information and discusses requests

Early March

A&F makes reservations

Mid March

A&F receives and approves requests for individual bond issuances against reservations

From reservation date through

end of calendar year

A&F reviews status of volume cap use and adjusts reservations as needed

Early Fall

On February 15, 2007, ANF hosted a public hearing about the 2007 volume cap reservation. Over 120 members of the public attended this hearing, with 25 people testifying and dozens more submitting written testimony. On March 21, 2007, ANF announced the 2007 volume cap reservations. Material from the hearing and the announcement press release can be found below:

To request further information about Private Activity Bonds, or to send ANF a comment on either the TEFRA approvals or volume cap reservation processes, please use the "Contact Us" link in the lower right corner of this page.