When governments or nonprofits use tax-exempt bonds to finance capital projects, they’re expected to keep the primary benefit of that property in the public’s hands.

That’s where private business use (PBU) comes in. The IRS sets clear limitations on how much private use is allowed before the tax-exempt status of the obligation is at risk.

However, PBU isn’t just about what’s happening now but also about what happens over time.

To evaluate whether your organization is staying within those limits, you need to understand the measurement period.

This timeframe determines when private use is tracked and getting it right is essential for maintaining compliance and avoiding unpleasant surprises during an audit.

To help you calculate this more easily, we’ve created a Measurement Period Calculator. This tool walks you through the key inputs such as in-service dates, final maturity and expected asset life to give you clarity on your compliance window.

What is the Measurement Period and Why Does it Matter?

The measurement period is the specific window of time during which private business use is tracked for a bond-financed asset. 

In most cases, the IRS allows no more than 10% of a bond-financed property’s use to benefit a private party, like a vendor operating a concession or a private business renting space. But to assess that use accurately, you first need to know when the clock starts and when it stops. 

That’s your measurement period.

It’s important to note: this has nothing to do with depreciation or accounting rules. You’re not determining the asset’s useful life for financial reporting.

Instead, you’re identifying the compliance window the IRS uses to evaluate private use.

When Does the Measurement Period Start and End?

To calculate the measurement period, you’ll need to identify two key points in time: when it begins and when it ends.

This might sound straightforward, but the IRS applies specific rules that can vary depending on the project and bond structure.

Start Date:

The measurement period begins on the later of:

• The bond issue date, or
  
  
• The date the property is placed in service
  
  

End Date:

It ends on the earlier of:

• The end of the property's reasonably expected economic life, or
  
  
• The final maturity date of the bonds
  
  

Think of the measurement period as a window of time framed by those two markers. If the property is placed in service after the bonds are issued, you don’t start counting private use until it’s actually being used. And once the property reaches the end of its expected life (or the bonds are fully paid off) the measurement period closes.

Because these inputs can vary widely across projects and organizations, we created a downloadable Measurement Period Calculator to help you quickly and accurately determine your compliance window. Just enter a few key dates, and the calculator does the rest.

Why Calculating the Measurement Period Can Be Challenging

Multi-phase construction or renovation efforts may span several years, with different components placed in service at different times.

Add in multiple funding sources (like a mix of bond proceeds, equity, or grants) and it becomes harder to isolate exactly which assets are tied to which bond issue.

Then there’s the confusion between accounting useful life and economic life for tax compliance purposes. While they might sound similar, they serve different functions.

As it relates to private use, the IRS focuses on how long a property is expected to be in use, not how it’s depreciated on your books.

Accurately tracking in-service dates and bond maturity dates is essential to define the measurement period correctly. Missteps here can lead to incorrect private use calculations, putting your organization at risk of noncompliance or audit findings.

That’s why having a structured, consistent way to calculate the measurement period can make all the difference.

Introducing the Measurement Period Calculator

The Measurement Period calculator helps you determine the exact measurement period for private business use tracking by taking in just a few key inputs:

• Bond issue date
  
  
• Property in-service date
  
  
• Expected economic life of the asset
  
  
• Final maturity date of the bonds
  
  

From there, the tool calculates:

• The start date of the measurement period
  
  
• The end date
  
  
• The total duration of the compliance window
  
  

It’s important to note: this tool isn’t designed for depreciation schedules or GAAP financial reporting. It’s built specifically to help you stay compliant with IRS regulations around private business use.

How DebtBook Helps You Stay Compliant

Understanding the measurement period is just one part of staying compliant. Tracking private business use accurately over time is another challenge altogether. That’s where DebtBook’s Bond Proceeds Management feature comes in.

With DebtBook, you can confidently track and manage private business use across your entire portfolio. Our platform helps you:

• Track key dates across bond issues and projects so nothing slips through the cracks
  
  
• Centralize all documentation and project-level data in one place, so no more hunting through spreadsheets or folders
  
  
• Monitor and calculate private use in real time over the full measurement period
  
  
• Receive compliance alerts before you exceed IRS thresholds
  
  
• Navigate complex scenarios, like refunded bonds or disproportionate use, with built-in flexibility
  
  

Key Features That Support Compliance:

• Dedicated project spaces to organize spending, usage data, documents, and funding sources
  
  
• Real-time private use calculations to give you visibility into where you stand
  
  
• Multi-series funding tracking, including allocations across original and refunding bonds
  
  
• Cloud-based collaboration, making it easy to work with your bond counsel, tax advisors, and internal teams
  
  

With everything in one place, you can ensure consistent, accurate tracking and reduce the risk of compliance surprises down the road.

Related Debt Management Reading

• Key Rules & Risk Areas for Private Business Use Compliance
• Breaking Down the Math Behind Municipal Bonds
• Debt Service Calculator for Tax-Exempt Bonds

Disclaimer: DebtBook does not provide professional services or advice. DebtBook has prepared these materials for general informational and educational purposes, which means we have not tailored the information to your specific circumstances. Please consult your professional advisors before taking action based on any information in these materials. Any use of this information is solely at your own risk.