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Bill offers tax relief for rural lendingBill offers tax relief for rural lending

Enhancing Credit Opportunities in Rural America Act would help lower loan rates for rural lenders.

Jacqui Fatka

March 17, 2021

3 Min Read
rural banking boost from ECORA Act
roschetzky/iStock/Getty Images Plus

Farm bankruptcies are on the rise and the COVID-19 pandemic has only compounded the rural financial burden, as farmers faced upended food supply chains and reduced access to critical markets over the past year. A new bill - the Enhancing Credit Opportunities in Rural America Act - will help provide support to agricultural producers during these challenging times. Estimates show that the bill could reduce the average interest rate on a farm real estate loan by 1.5 to 2%.

Rep. Randy Feenstra, R-Iowa, partnered with Rep. Ron Kind, D-Wisc., to introduce the ECORA Act, which would remove taxation on income from farm real estate loans made by community banks. The Act will benefit farmers, families, and rural communities by allowing more institutions to offer affordable credit to rural and agricultural borrowers.

Feenstra notes the bill is an important proposal that will help provide lower cost loans to farmers and ranchers. Specifically, the ECORA Act would amend the Internal Revenue Service code to level the playing field for bankers that administer agricultural real estate loans by granting them tax exempt status on interest earned. This same exemption is already granted to farm credit institutions.

Leveling the playing field will create competition, drive down interest rates, and help provide farmers with more affordable loan options, a release from Feenstra explains.

Iowa, Wisconsin, Kansas, Maryland, Minnesota, Nebraska, New Hampshire, South Dakota and West Virginia have all experienced a decade-high number of farm bankruptcies.

Kind says he’s heard from many Wisconsin lenders and farmers about a credit crunch for agricultural and rural loans, which has only worsened as the COVID-19 crisis continues.

“The ECORA Act will take steps to address this issue, lowering the cost for farmers and families to acquire credit in our rural communities and providing a pathway to increased income,” Kind says. “Especially during these challenging times, we need to ensure our hardworking family farmers get the support they need and increasing their access to low-cost credit is an important way to do so.”

The Independent Community Bankers of America says it strongly supports the bill. “With community banks making 80% of banking industry agricultural loans, ICBA strongly supports the Enhancing Credit Opportunities in Rural America Act to help them offer lower rates to certain rural borrowers and homeowners," says ICBA President and CEO Rebeca Romero Rainey. "This important legislation will help sustain and revive rural economies struggling to overcome the impact of the COVID-19 pandemic while providing community bank lenders with benefits they can pass on to customers, similar to other rural credit providers."

The bill would also provide similar relief to interest on loans secured by rural single-family homes that are the borrower's principal residence in towns with populations under 2,500. It also assists those seeking to remain on the farm or acquire a home loan in rural communities by providing borrowers with better rates and loan terms.

The bill also offers community banks greater flexibility to work with farmers who may have trouble servicing their debt. And it gives lenders a strong incentive to remain in the rural farming and housing markets, thereby boosting local economic activity, ICBA says.


About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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