Letter to the IRS on the Interim Guidance re: Interest on Loans Secured by Rural or Agricultural Real Property

To Whom it May Concern:

The American Bankers Association appreciates the opportunity to comment on the Interim Guidance implementing Section 139L of the Internal Revenue Code. We support the statute's goal of improving access to affordable, long-term credit for farmers, ranchers, and other agricultural producers, and we share Treasury's and the IRS's interest in providing clear, administrable rules for lenders and taxpayers.

Banks are key partners and provide agricultural credit nationwide and serve farmers, ranchers, cooperatives, and rural communities of all sizes. They will be central to the success of Section 139L. As such, our comments focus on ensuring that the Interim Guidance is workable in practice for lenders and consistent with the statute and congressional intent.

We respectfully urge Treasury and the IRS to:

• Use the Congressional Intent Letter on Section 139L as a basis for guidance and definitions.
• Maintain a broad, practical definition of agricultural real property and related structures that is consistent with existing tax rules and Congressional intent to expand options for farmers and ranchers.
• Avoid narrow or mechanical eligibility tests that would fail to reflect the diversity of agricultural operations and could discourage participation in Section 139L.
• Align key eligibility concepts with Farm Credit4 where appropriate, so that similarly situated agricultural borrowers are treated consistently.
• Provide clear and coordinated guidance on the interaction of Section 139L with IRC Section 265, including the TEFRA provisions and bank qualified concepts, to avoid conflicting interpretations by tax advisors.
• Consider a loan as new when new underwriting is used for said loan.
• Address several implementation issues, such as refinancings and pre-enactment loans, which will significantly affect how lenders structure Section 139L lending programs over time.

The sections below provide preliminary responses to the specific questions in the Interim Guidance, followed by a brief discussion of additional issues. We would welcome the opportunity to give more details as the agencies refine the guidance.

Download the letter to read the full text.