26 U.S.C. § 146 — Volume cap

(a) General rule. A private activity bond meets this section's requirement if the total face amount of bonds in its issue, added to all the tax-exempt private activity bonds the same issuing authority already issued that calendar year, does not go over that authority's "volume cap" for the year. (b) Volume cap for State agencies. A state agency that can issue tax-exempt private activity bonds gets a volume cap equal to 50 percent of the state's overall ceiling for that year. If a state has more than one such agency, all of them together are treated as a single agency for this purpose. (c) Volume cap for other issuers. For any other issuing authority (not a state agency), its volume cap for the year equals 50 percent of the state ceiling, multiplied by the fraction of the state's population living in that authority's jurisdiction. If an area sits inside more than one government unit's jurisdiction, it is treated as belonging only to the unit covering the smallest area — unless that unit agrees to give up jurisdiction to the overlapping unit with the next-smallest area. (d) State ceiling. Each state's yearly ceiling is the larger of two numbers: $75 times the state's population (or $62.50 per person for 2001), or $225,000,000 (or $187,500,000 for 2001). Starting in 2003, these dollar amounts go up each year with a cost-of-living adjustment, rounded to the nearest $5 (or $5,000 for the flat dollar amount). Special rules apply to "constitutional home rule cities" — certain cities with home-rule power under a state constitution adopted in 1970 — giving them their own 100 percent-based volume cap and adjusting the rest of the state's ceiling to account for it. A possession of the United States with a smaller population than the least populous state gets a minimum ceiling calculated using that state's per-person amount. For 2008, each state's ceiling temporarily increased by a share of $11,000,000,000, but that extra amount had to be used only for qualified housing bond issues. (e) State may provide for different allocation. A state may pass a law setting its own formula for dividing the state ceiling among its governmental units, instead of using the formula in this section. Until it does, the Governor may proclaim a different formula, but that power ends once the legislature has held a regular session or the state passes its own law on the subject. Neither a state law nor a Governor's proclamation can change a constitutional home rule city's allocation unless that city agrees. (f) Elective carryforward of unused limitation for specified purpose. If an issuing authority does not use its full volume cap in a year, it can elect to carry the unused amount forward for specific purposes, such as certain exempt facility bonds, mortgage bonds, student loan bonds, or redevelopment bonds. The authority must say which purpose the carryforward is for and how much is set aside for each. It then has three years to use that carryforward for the stated purpose, using older carryforwards before newer ones. Once made, this election cannot be taken back. (g) Exception for certain bonds. For purposes of this section only, "private activity bond" does not include certain bond types: qualified veterans' mortgage bonds, qualified 501(c)(3) bonds, and several kinds of exempt facility bonds. Some categories — such as high-speed rail, broadband, and carbon-capture facility bonds — get a 75 percent exclusion from the cap instead of a full exclusion, unless a government unit owns all the property being financed, in which case the full amount is excluded. (h) Exception for government-owned solid waste disposal facilities. A bond financing a government-owned solid waste disposal facility is also excluded from counting as a "private activity bond" for this section, using a special ownership test that allows lease terms up to 20 years. (i) Treatment of refunding issues. A bond issued to refund, or pay off, an earlier bond generally does not count against the volume cap, up to the amount of the original bond still outstanding. Special maturity-date limits apply to refunding student loan bonds and mortgage bonds. This refunding exception does not apply to advance refundings. A special rule also lets certain residential rental project loans be refinanced as if they were refunding bonds, under specific time and approval limits. (j) Population. For this section, a state's or authority's population is based on the most recent Census Bureau estimate available before the start of the calendar year in question. (k) Facility must be located within State. Generally, a state's volume cap cannot be used to finance a facility located outside that state. Exceptions apply for certain facilities, like some airports or docks, if the issuer shows the state will get a fair share of the facility's benefits or use in proportion to the bonds issued, and for certain government-use bonds meeting a similar proportional-benefit test. (l) Issuer of qualified scholarship funding bonds. A qualified scholarship funding bond is treated, for this section, as issued by whichever state or local authority is appropriate. (m) Treatment of amounts allocated to private activity portion of government use bonds. An issuer's volume cap is reduced by whatever amount it allocates to the private-activity part of a government-use bond under section 141(b)(5). Advance refundings of such bonds are generally counted against the cap the same way the original allocation was. (n) Reduction for mortgage credit certificates, etc. An issuing authority's volume cap for a year is reduced by the amount of qualified mortgage bonds it chooses not to issue in favor of mortgage credit certificates, plus any reduction required under section 25(f).