Treasury, IRS issue guidance on ACRE Act tax exclusion 

The Treasury Department and IRS issued interim guidance for the ICBA-advocated ACRE Act tax exclusion for agricultural lending passed under the One Big Beautiful Bill Act. 

About the Policy: The One Big Beautiful Bill Act added a section to the Internal Revenue Code that allows lenders to exclude from gross income 25% of the interest they receive from loans secured by rural or agricultural real property. The ACRE Act exclusion—long sought by ICBA—was enacted under Section 139L of the OBBBA. 

About the Guidance: The IRS said the guidance defines key terms, establishes standards for determining whether a loan is secured by rural or agricultural property, and provides rules regarding loans that refinance a prior loan but also include new money. Proposed regulations are forthcoming and will be similar to the guidance. 

ICBA Advocacy: In a joint letter earlier this year, ICBA and its affiliated state community banking associations called on Treasury to ensure the exclusion applies to as many agricultural loans as possible. The groups urged Treasury Department to take a broad interpretation of loans used to acquire rural and agricultural real estate, including any loan secured by such real estate. 

ICBA View: ICBA is reviewing the guidance and plans to submit formal comments ahead of the Jan. 20 comment deadline. ICBA’s primary concern remains ensuring the regulations qualify as many loans as possible, consistent with the statute, and don’t impose restrictions that would deny interest rate relief to the farmers and ranchers the new law is designed to benefit.