The massive budget reconciliation bill signed by President Trump earlier this month included several ABA-supported tax provisions related to banks. One of those was the Access to Credit for our Rural Economy Act, or ACRE.
While the version included in the final legislation is modified from ABA’s original ACRE proposal, there remains significant relief for rural and agricultural communities. Primarily, qualified lenders will be able to exclude from gross income 25% of interest income derived from certain qualified real estate loans without a sunset date. What this means for farmers and ranchers is that they will receive benefits by banks passing the savings from ACRE on through interest rate changes and through a more competitive lending environment.
A qualified real estate loan includes:
- Any loan secured by rural agricultural real estate or a leasehold mortgage (with a status as a lien) on rural agricultural real estate;
- Any real property that is substantially used for the production of agricultural products;
- Any real property that is substantially used in the trade or business of fishing or seafood processing; and
- Any aquaculture facility.
In addition, the legislation also prohibits qualifying loans for the ACRE tax benefit if the loan is a refinancing of a loan made prior to the passage of the One Big Beautiful Bill Act.
The bill also provides language for ACRE to conform with section 265 of the Internal Revenue Code of 1986. This will ensure that loans using the ACRE tax benefit will have proper interest expensing based on the 25% tax benefit.
While the law is effective immediately, implementing guidance and regulations are needed to help further define the eligibility of loans and refine the definition of refinancing, among other clarifications. ABA will continue to engage IRS and Congress to ensure the statue is implemented as intended and in a way that functions most efficiently for lenders.
Editor’s note: ABA has provided a members-only staff analysis to help outline the bill’s effect on rural and agricultural communities, including ACRE and other provisions.
