Title 26, Internal Revenue CodeRelease 119-110
§146 Volume Cap
Title 26 › Subtitle A — Income Taxes › CHAPTER 1 — NORMAL TAXES AND SURTAXES › Subchapter B — Computation of Taxable Income › PART IV — TAX EXEMPTION REQUIREMENTS FOR STATE AND LOCAL BONDS › Subpart A — Private Activity Bonds › § 146
Summary
Limits how much tax-free private activity debt each issuer can put out in a year. An issuer’s total new private activity bonds in a year, plus what it already issued that year, cannot go over its “volume cap.” The State ceiling is the starting point. It is the larger of $75 per person ($62.50 in 2001) or $225,000,000 ($187,500,000 in 2001). After 2002 those dollar amounts rise with a cost-of-living adjustment and are rounded to the nearest $5 (or $5,000 for the big number). State agencies get 50% of the State ceiling. Other local issuers share 50% of the State ceiling in proportion to their population. If a State has constitutional home rule cities, those cities get a cap based on 100% instead of 50%, and their amounts reduce what remains for other issuers. Small U.S. possessions get a minimum amount based on a population formula. For 2008 the State ceilings were increased by a share of $11,000,000,000; that extra money can only fund qualified housing and cannot be used after 2010. States may set a different allocation by law, or the Governor can temporarily set one, but allocations to constitutional home rule cities generally cannot be changed without the city’s agreement. If an issuer does not use its cap in a year, it may irrevocably carry forward unused amounts for up to three years for certain purposes (like specified facility bonds, mortgage bonds or certificates, student loan bonds, or redevelopment bonds) and must say how much is for each purpose. Refunding bonds generally do not count against the cap to the extent they do not exceed the refunded amount, with special maturity limits for student loan and mortgage refundings and other detailed rules. Certain bond types and portions (for example qualified veterans’ mortgages, 501(c)(3) bonds, and specified exempt facility bonds or portions thereof) are not treated as private activity bonds for these limits. Bonds must mostly finance facilities in the State, with narrow exceptions. Definitions (one line each): State ceiling — the base dollar limit for a State in a year. Volume cap — the yearly limit an issuer can use. Constitutional home rule city — a city with home-rule powers under a 1970 State constitution that was effective July 1, 1971. Carryforward purpose — the allowed categories for rolling unused cap forward (facility bonds, mortgage bonds/credits, student loan bonds, redevelopment bonds).
Full Legal Text
Title 26, §146
Internal Revenue Code, Source: USLM XML via OLRC
(a)General rule
A private activity bond issued as part of an issue meets the requirements of this section if the aggregate face amount of the private activity bonds issued pursuant to such issue, when added to the aggregate face amount of tax-exempt private activity bonds previously issued by the issuing authority during the calendar year, does not exceed such authority’s volume cap for such calendar year.
(b)Volume cap for State agencies
For purposes of this section
(1) In general
(2)Special rule where State has more than 1 agency
If more than 1 agency of the State is authorized to issue tax-exempt private activity bonds, all such agencies shall be treated as a single agency.
(c)Volume cap for other issuers
For purposes of this section
(1) In general
(2)Overlapping jurisdictions
For purposes of paragraph (1)(A), if an area is within the jurisdiction of 2 or more governmental units, such area shall be treated as only within the jurisdiction of the unit having jurisdiction over the smallest geographical area unless such unit agrees to surrender all or part of such jurisdiction for such calendar year to the unit with overlapping jurisdiction which has the next smallest geographical area.
(d)State ceiling
For purposes of this section
(1) In general
(2)Cost-of-living adjustment
In the case of a calendar year after 2002, each of the dollar amounts contained in paragraph (1) shall be increased by an amount equal to—
(A)such dollar amount, multiplied by
(B)the cost-of-living adjustment determined under section 1(f)(3) for such calendar year by substituting “calendar year 2001” for “calendar year 2016” in subparagraph (A)(ii) thereof.
If any increase determined under the preceding sentence is not a multiple of $5 ($5,000 in the case of the dollar amount in paragraph (1)(B)), such increase shall be rounded to the nearest multiple thereof.
(3)Special rule for States with constitutional home rule cities
For purposes of this section
(A) In general
(B)Coordination with other allocations
In the case of any State which contains 1 or more constitutional home rule cities, for purposes of applying subsections (b) and (c) with respect to issuing authorities in such State other than constitutional home rule cities, the State ceiling for any calendar year shall be reduced by the aggregate volume caps determined for such year for all constitutional home rule cities in such State.
(C)Constitutional home rule city
For purposes of this section, the term “constitutional home rule city” means, with respect to any calendar year, any political subdivision of a State which, under a State constitution which was adopted in 1970 and effective on July 1, 1971, had home rule powers on the 1st day of the calendar year.
(4)Special rule for possessions with populations of less than the population of the least populous State
(A)In general
If the population of any possession of the United States for any calendar year is less than the population of the least populous State (other than a possession) for such calendar year, the limitation under paragraph (1)(A) shall not be less than the amount determined under subparagraph (B) for such calendar year.
(B)Limitation
The limitation determined under this subparagraph, with respect to a possession, for any calendar year is an amount equal to the product of— (i)
(ii)the population of such possession for such calendar year.
(5)Increase and set aside for housing bonds for 2008
(A)Increase for 2008
In the case of calendar year 2008, the State ceiling for each State shall be increased by an amount equal to $11,000,000,000 multiplied by a fraction—
(i)the numerator of which is the State ceiling applicable to the State for calendar year 2008, determined without regard to this paragraph, and
(ii)the denominator of which is the sum of the State ceilings determined under clause (i) for all States.
(B)Set aside
(i)In general
Any amount of the State ceiling for any State which is attributable to an increase under this paragraph shall be allocated solely for one or more qualified housing issues.
(ii)Qualified housing issue
For purposes of this paragraph, the term “qualified housing issue” means—
(I)an issue described in section 142(a)(7) (relating to qualified residential rental projects), or
(II)a qualified mortgage issue (determined by substituting “12-month period” for “42-month period” each place it appears in section 143(a)(2)(D)(i)).
(e)State may provide for different allocation
For purposes of this section
(1) In general
(2)Interim authority for Governor (3) State may not alter allocation to constitutional home rule cities
(A)In general
Except as otherwise provided in paragraph (3), the Governor of any State may proclaim a different formula for allocating the State ceiling among the governmental units (or other authorities) in such State having authority to issue private activity bonds.
(B)Termination of authority
The authority provided in subparagraph (A) shall not apply to bonds issued after the earlier of— (i)
(ii)the effective date of any State legislation with respect to the allocation of the State ceiling.
(f)Elective carryforward of unused limitation for specified purpose
(1)In general
If—
(A)an issuing authority’s volume cap for any calendar year after 1985, exceeds
(B)the aggregate amount of tax-exempt private activity bonds issued during such calendar year by such authority,
such authority may elect to treat all (or any portion) of such excess as a carryforward for 1 or more carryforward purposes.
(2)Election must identify purpose
In any election under paragraph (1), the issuing authority shall—
(A)identify the purpose for which the carryforward is elected, and
(B)specify the portion of the excess described in paragraph (1) which is to be a carryforward for each such purpose.
(3)Use of carryforward
(A)In general
If any issuing authority elects a carryforward under paragraph (1) with respect to any carryforward purpose, any private activity bonds issued by such authority with respect to such purpose during the 3 calendar years following the calendar year in which the carryforward arose shall not be taken into account under subsection (a) to the extent the amount of such bonds does not exceed the amount of the carryforward elected for such purpose.
(B)Order in which carryforward used
Carryforwards elected with respect to any purpose shall be used in the order of the calendar years in which they arose.
(4)Election
Any election under this paragraph (and any identification or specification contained therein), once made, shall be irrevocable.
(5)Carryforward purpose
The term “carryforward purpose” means—
(A)the purpose of issuing exempt facility bonds described in 1 of the paragraphs of section 142(a),
(B)the purpose of issuing qualified mortgage bonds or mortgage credit certificates,
(C)the purpose of issuing qualified student loan bonds, and
(D)the purpose of issuing qualified redevelopment bonds.
(6)Special rules for increased volume cap under subsection (d)(5)
No amount which is attributable to the increase under subsection (d)(5) may be used—
(A)for any issue other than a qualified housing issue (as defined in subsection (d)(5)), or
(B)to issue any bond after calendar year 2010.
(g)Exception for certain bonds
Only for purposes of this section, the term “private activity bond” shall not include—
(1)any qualified veterans’ mortgage bond,
(2)any qualified 501(c)(3) bond,
(3)any exempt facility bond issued as part of an issue described in paragraph (1), (2), (12), (13), (14), or (15) of section 142(a),
(4)75 percent of any exempt facility bond issued as part of an issue described in paragraph (11) of section 142(a) (relating to high-speed intercity rail facilities),
(5)75 percent of any exempt facility bond issued as part of an issue described in paragraph (16) of section 142(a) (relating to qualified broadband projects), and
(6)75 percent of any exempt facility bond issued as part of an issue described in paragraph (17) of section 142(a) (relating to qualified carbon dioxide capture facilities).
Paragraphs (4) and (5) shall be applied without regard to “75 percent of” if all of the property to be financed by the net proceeds of the issue is to be owned by a governmental unit (within the meaning of section 142(b)(1)).
(h)Exception for government-owned solid waste disposal facilities
(1)In general
Only for purposes of this section, the term “private activity bond” shall not include any exempt facility bond described in section 142(a)(6) which is issued as part of an issue if all of the property to be financed by the net proceeds of such issue is to be owned by a governmental unit.
(2)Safe harbor for determination of government ownership
In determining ownership for purposes of paragraph (1), section 142(b)(1)(B) shall apply, except that a lease term shall be treated as satisfying clause (ii) thereof if it is not more than 20 years.
(i)Treatment of refunding issues
For purposes of the volume cap imposed by this section— (1) In general
(2)Special rules for student loan bonds
In the case of any qualified student loan bond, paragraph (1) shall apply only if the maturity date of the refunding bond is not later than the later of— (A)
(B)the date 17 years after the date on which the refunded bond was issued (or in the case of a series of refundings, the date on which the original bond was issued).
(3)Special rules for qualified mortgage bonds
In the case of any qualified mortgage bond, paragraph (1) shall apply only if the maturity date of the refunding bond is not later than the later of— (A)
(B)the date 32 years after the date on which the refunded bond was issued (or in the case of a series of refundings, the date on which the original bond was issued).
(4)Average maturity
For purposes of paragraphs (2) and (3), average maturity shall be determined in accordance with section 147(b)(2)(A).
(5)Exception for advance refunding
This subsection shall not apply to any bond issued to advance refund another bond.
(6)Treatment of certain residential rental project bonds as refunding bonds irrespective of obligor
(A)In general
If, during the 6-month period beginning on the date of a repayment of a loan financed by an issue 95 percent or more of the net proceeds of which are used to provide projects described in section 142(d), such repayment is used to provide a new loan for any project so described, any bond which is issued to refinance such issue shall be treated as a refunding issue to the extent the principal amount of such refunding issue does not exceed the principal amount of the bonds refunded.
(B)Limitations
Subparagraph (A) shall apply to only one refunding of the original issue and only if—
(i)the refunding issue is issued not later than 4 years after the date on which the original issue was issued,
(ii)the latest maturity date of any bond of the refunding issue is not later than 34 years after the date on which the refunded bond was issued, and
(iii)the refunding issue is approved in accordance with section 147(f) before the issuance of the refunding issue.
(j)Population
For purposes of this section, determinations of the population of any State (or issuing authority) shall be made with respect to any calendar year on the basis of the most recent census estimate of the resident population of such State (or issuing authority) released by the Bureau of Census before the beginning of such calendar year.
(k)Facility must be located within State
(1)In general
Except as provided in paragraphs (2) and (3), no portion of the State ceiling applicable to any State for any calendar year may be used with respect to financing for a facility located outside such State.
(2)Exception for certain facilities where State will get proportionate share of benefits
Paragraph (1) shall not apply to any exempt facility bond described in paragraph (4), (5), (6), or (10) of section 142(a) if the issuer establishes that the State’s share of the use of the facility (or its output) will equal or exceed the State’s share of the private activity bonds issued to finance the facility.
(3)Treatment of governmental bonds to which volume cap allocated
Paragraph (1) shall not apply to any bond to which volume cap is allocated under section 141(b)(5)—
(A)for an output facility, or
(B)for a facility of a type described in paragraph (4), (5), (6), or (10) of section 142(a),
if the issuer establishes that the State’s share of the private business use (as defined by section 141(b)(6)) of the facility will equal or exceed the State’s share of the volume cap allocated with respect to bonds issued to finance the facility.
(l)Issuer of qualified scholarship funding bonds
In the case of a qualified scholarship funding bond, such bond shall be treated for purposes of this section as issued by a State or local issuing authority (whichever is appropriate).
(m)Treatment of amounts allocated to private activity portion of government use bonds
(1)In general
The volume cap of an issuer shall be reduced by the amount allocated by the issuer to an issue under section 141(b)(5).
(2)Advance refundings
Except as otherwise provided by the Secretary, any advance refunding of any part of an issue to which an amount was allocated under section 141(b)(5) (or would have been allocated if such section applied to such issue) shall be taken into account under this section to the extent of the amount of the volume cap which was (or would have been) so allocated.
(n)Reduction for mortgage credit certificates, etc.
The volume cap of any issuing authority for any calendar year shall be reduced by the sum of— (1)
(2)the amount of any reduction in such ceiling under section 25(f) applicable to such authority for such year.
Legislative History
Notes & Related Subsidiaries
Inflation Adjusted Items for Certain YearsFor inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under section 1 of this title.
Editorial Notes
Amendments
2021—Subsec. (g). Pub. L. 117–58, § 80401(c)(2), substituted “Paragraphs (4) and (5)” for “Paragraph (4)” in concluding provisions. Subsec. (g)(5). Pub. L. 117–58, § 80401(c)(1), added par. (5). Subsec. (g)(6). Pub. L. 117–58, § 80402(c), added par. (6). 2017—Subsec. (d)(2)(B). Pub. L. 115–97 substituted “for ‘calendar year 2016’ in subparagraph (A)(ii)” for “for ‘calendar year 1992’ in subparagraph (B)”. 2008—Subsec. (d)(5). Pub. L. 110–289, § 3021(a)(1), added par. (5). Subsec. (f)(6). Pub. L. 110–289, § 3021(a)(2), added par. (6). Subsec. (i)(6). Pub. L. 110–289, § 3007(a), added par. (6). 2005—Subsec. (g)(3). Pub. L. 109–59 substituted “(14), or (15) of section 142(a), and” for “or (14) of section 142(a) (relating to airports, docks and wharves, environmental enhancements of hydroelectric generating facilities, qualified public educational facilities, and qualified green building and sustainable design projects), and”. 2004—Subsec. (g)(3). Pub. L. 108–357 substituted “(13), or (14)” for “or (13)” and “qualified public educational facilities, and qualified green building and sustainable design projects” for “and qualified public educational facilities”. 2001—Subsec. (g)(3). Pub. L. 107–16 substituted “(12), or (13)” for “or (12)” and “environmental enhancements of hydroelectric generating facilities, and qualified public educational facilities” for “and environmental enhancements of hydroelectric generating facilities”. 2000—Subsec. (d)(1), (2). Pub. L. 106–554 amended pars. (1) and (2) generally. Prior to amendment, pars. (1) and (2) provided for State ceilings based on the per capita limits and aggregate limits set out in an included table. 1998—Subsec. (d)(1). Pub. L. 105–277 added par. (1) and struck out heading and text of former par. (1). Text read as follows: “The State ceiling applicable to any State for any calendar year shall be the greater of— “(A) an amount equal to $75 multiplied by the State population, or “(B) $250,000,000. Subparagraph (B) shall not apply to any possession of the United States.” Subsec. (d)(2). Pub. L. 105–277 added par. (2) and struck out heading and text of former par. (2). Text read as follows: “In the case of calendar years after 1987, paragraph (1) shall be applied by substituting— “(A) ‘$50’ for ‘$75’, and “(B) ‘$150,000,000’ for ‘$250,000,000’.” 1993—Subsec. (g). Pub. L. 103–66, which directed the amendment of par. (4) by adding at the end thereof the following flush sentence: “Paragraph (4) shall be applied without regard to ‘75 percent of’ if all of the property to be financed by the net proceeds of the issue is to be owned by a governmental unit (within the meaning of section 142(b)(1)).”, was executed by inserting the sentence at the end of subsec. (g), to reflect the probable intent of Congress. 1992—Subsec. (g)(3). Pub. L. 102–486 substituted “, (2), or (12)” for “or (2)” and “, docks and wharves, and environmental enhancements of hydroelectric generating facilities” for “and docks and wharves”. 1989—Subsec. (g)(3), (4). Pub. L. 101–239 redesignated par. (3), relating to exempt facility bonds issued as part of an issue described in par. (11) of section 142(a), as (4). 1988—Subsec. (d)(4)(B). Pub. L. 100–647, § 1013(a)(40), substituted “respect to a” for “respect a”. Subsec. (f)(5)(A). Pub. L. 100–647, § 1013(a)(9), amended subpar. (A) generally, as in effect before amendment by Pub. L. 100–203. Before amendment by Pub. L. 100–203, subpar. (A) read as follows: “the purpose of issuing bonds referred to in one of the clauses of section 141(d)(1)(A),”. Subsec. (g)(3). Pub. L. 100–647, § 6180(b)(3), added par. (3) relating to exempt facility bonds issued as part of an issue described in par. (11) of section 142(a). Subsec. (i)(2)(A). Pub. L. 100–647, § 1013(a)(28)(A), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “the maturity date of the bond to be refunded, or”. Subsec. (i)(3)(A). Pub. L. 100–647, § 1013(a)(28)(B), amended subpar. (A) generally. Prior to amendment, subpar. (A) read as follows: “the maturity date of the bond to be refunded, or”. Subsec. (i)(4), (5). Pub. L. 100–647, § 1013(a)(28)(C), added par. (4) and redesignated former par. (4) as (5). Subsec. (k)(1). Pub. L. 100–647, § 1013(a)(10)(A), substituted “paragraphs (2) and (3)” for “paragraph (2)”. Subsec. (k)(3). Pub. L. 100–647, § 1013(a)(10)(B), added par. (3). 1987—Subsec. (f)(5)(A). Pub. L. 100–203 amended subpar. (A) generally, as amended by Pub. L. 100–647, § 1013(a)(9), restating it without change. See 1988 Amendment note above.
Statutory Notes and Related Subsidiaries
Effective Date
of 2021 AmendmentAmendment by section 80401(c) of Pub. L. 117–58 applicable to obligations issued in calendar years beginning after Nov. 15, 2021, see section 80401(d) of Pub. L. 117–58, set out as a note under section 142 of this title. Amendment by section 80402(c) of Pub. L. 117–58 applicable to obligations issued after Dec. 31, 2021, see section 80402(f) of Pub. L. 117–58, set out as a note under section 45Q of this title.
Effective Date
of 2017 AmendmentAmendment by Pub. L. 115–97 applicable to taxable years beginning after Dec. 31, 2017, see section 11002(e) of Pub. L. 115–97, set out as a note under section 1 of this title.
Effective Date
of 2008 AmendmentAmendment by section 3007(a) of Pub. L. 110–289 applicable to repayments of loans received after
July 30, 2008, see section 3007(c) of Pub. L. 110–289, set out as a note under section 42 of this title. Amendment by section 3021(a) of Pub. L. 110–289 applicable to bonds issued after
July 30, 2008, see section 3021(c) of Pub. L. 110–289, set out as a note under section 143 of this title.
Effective Date
of 2005 AmendmentAmendment by Pub. L. 109–59 applicable to bonds issued after Aug. 10, 2005, see section 11143(d) of Pub. L. 109–59, set out as a note under section 142 of this title.
Effective Date
of 2004 AmendmentAmendment by Pub. L. 108–357 applicable to bonds issued after Dec. 31, 2004, see section 701(e) of Pub. L. 108–357, set out as a note under section 142 of this title.
Effective Date
of 2001 AmendmentAmendment by Pub. L. 107–16 applicable to bonds issued after Dec. 31, 2001, see section 422(f) of Pub. L. 107–16, set out as a note under section 142 of this title.
Effective Date
of 2000 Amendment Pub. L. 106–554, § 1(a)(7) [title I, § 161(b)], Dec. 21, 2000, 114 Stat. 2763, 2763A–624, provided that: “The amendment made by this section [amending this section] shall apply to calendar years after 2000.”
Effective Date
of 1998 Amendment Pub. L. 105–277, div. J, title II, § 2021(b), Oct. 21, 1998, 112 Stat. 2681–903, provided that: “The amendment made by this section [amending this section] shall apply to calendar years after 1998.”
Effective Date
of 1993 Amendment Pub. L. 103–66, title XIII, § 13121(b), Aug. 10, 1993, 107 Stat. 432, provided that: “The amendment made by subsection (a) [amending this section] shall apply to bonds issued after December 31, 1993.”
Effective Date
of 1992 AmendmentAmendment by Pub. L. 102–486 applicable to bonds issued after Oct. 24, 1992, see section 1921(c) of Pub. L. 102–486, set out as a note under section 142 of this title.
Effective Date
of 1989 AmendmentAmendment by Pub. L. 101–239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100–647, to which such amendment relates, see section 7817 of Pub. L. 101–239, set out as a note under section 1 of this title.
Effective Date
of 1988 AmendmentAmendment by section 1013(a)(9), (10), (28), (40) of Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title. Amendment by section 6180(b)(3) of Pub. L. 100–647 applicable to bonds issued after Nov. 10, 1988, see section 6180(c) of Pub. L. 100–647, set out as a note under section 142 of this title.
Effective Date
of 1987 AmendmentAmendment by Pub. L. 100–203 applicable, with certain exceptions, to bonds issued after Oct. 13, 1987 (other than bonds issued to refund bonds issued on or before such date), see section 10631(c) of Pub. L. 100–203, set out as a note under section 141 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 146
Title 26, Internal Revenue Code
Last Updated
Sep 22, 2026
Release point: 119-110