Bankers Look to Drive Home the ACRE Act

In Competition Battle with Farm Credit, Bankers Seek Tax Break on Rural Loans

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Rob Nichols, president and CEO of the American Bankers Association, talks about legislative priorities, such as the ACRE Act, with Kirsten Sutton, ABA's executive vice president of congressional relations. ACRE was an almost nonstop talking point at the ABA's Agricultural Bankers Conference this past week in Oklahoma City. (Photo by Stephanie Ascari, courtesy of ABA)

OKLAHOMA CITY (DTN) -- When Kansas banker Leonard Wolfe took the stage at the Agricultural Bankers Conference this week to receive the group's highest award, he immediately dove into a passionate talk about a bill in Congress that would give community banks some tax-exempt status on the interest of certain farm and home loans.

The bill, Access to Credit for our Rural Economy (ACRE) Act, has been a focus of the American Bankers Association (ABA) for at least eight years. At the ABA's ag bankers meeting in Oklahoma City this week, nearly everyone who spoke at the podium took time to plug the ACRE Act.

"I don't want to beat it to death, but ACRE is probably the most important legislation in generations not only for our community banks and the model we represent but for the communities that we live and work in and that we love," said Wolfe, president and CEO of United Bank & Trust in Marysville, Kansas. "I don't say that lightly."

Essentially, ACRE would give rural bankers a tax exemption for interest income generated from loans secured with farm real estate similar to the tax exemption given to the Farm Credit institutions. That would allow bankers to lower their interest for borrowers an estimated .5% to 1.5% on loans.

The ABA, in a letter to congressional leaders in July, stated the lower interest saves farmers and ranchers roughly $950 million per year, though there is no specific guarantee banks have to pass on their tax savings back to customers.

"We're going to be forced by competition to pass those lower rates on to our customers because if we don't those other banks will -- the people who offer credit in rural America will," Wolfe said. "So, at the end of the day, it won't have a monetary advantage at all for community and ag banks, but what it's going to do is perpetuate the community and ag banking model to help our rural communities sustain their viability for years to come."

The bill's tax exemption also applies to single-family home loans under $750,000 in rural communities with less than 2,500 residents. That also includes rural homes on the outskirts of larger communities. On rural home mortgages, ABA estimates it would result in about $200 million in yearly savings. Wolfe said that would help support rural economic development efforts.

"The housing aspect of ACRE is very important and resonates with our legislators everywhere," he said.

ABA leaders pressed the 500 or so agricultural bankers to talk about ACRE to their local farm organizations as well as economic development groups in their communities to build some synergy for the bill.

"One of the problems we're having when we go into congressional offices ... and talk to these members is 'This sounds great, but why haven't we heard from any of your end users? Why haven't any of the beneficiaries -- supposed beneficiaries -- [been] coming in and saying they need ACRE?'" said Kirsten Sutton, ABA's executive vice president of congressional relations. "We need to get more ag groups joining the chorus and asking for this legislation."

Sutton said a lot more work is needed to get ACRE to advance in Congress.

"Farm Credit is not a huge fan because they're not interested in the competition, but if we are talking about Farm Credit in congressional offices, we are losing," Sutton said.

Rural lawmakers who the bankers need for ACRE are also likely to have a relationship with Farm Credit. Sutton said bankers need to advocate for rural consumers.

"We need to be consumer-first in our advocacy," Sutton said.

ACRE could gain some support if state agricultural directors back the bill. A resolution on ACRE could get the backing of the National Association of State Departments of Agriculture (NASDA) and Sutton encouraged bankers to plug the bill to their state ag directors as well.

The House bill, led by Reps. Randy Feenstra, R-Iowa, and Wiley Nickel, D-N.C., has 46 co-sponsors -- 32 Republicans and 14 Democrats. Perhaps as importantly, at least seven House members backing the bill are members of the Ways and Means Committee, the primary committee that deals with tax bills.

"That is more Democratic support for this legislation than we have ever had," said Sutton.

The Senate bill has drawn a lot less interest. Sen. Jerry Moran, R-Kansas, introduced the bill with Sen. Angus King, an independent from Maine who caucuses with Democrats. Still, the Senate version of ACRE has not drawn any interest from Democrats or any member of the Senate Finance Committee, which oversees tax policy in the Senate.

ABA President and CEO Rob Nichols noted it was important King had joined the bill, but he also called on bankers to talk more with Democratic senators.

"Historically, Republicans have gravitated toward this bill, but Democrats less. That changed this summer," Nichols said.

He added, "It's not a partisan bill and it never was designed to be a partisan bill. So, to the extent anyone in this room has a relationship with elected lawmakers who is a Democrat, they are very valuable right now to have that conversation with them, to explain how it will help your rural communities or the part of the state that you live in. To the extent anyone has that relationship, we are desperate and we would love for you to utilize it."

Also see, "Ag Bankers Concerned About Farmer Liquidity and Income Coming Out of 2023,"…

And, "A Fear of the 1980s for Farmers and Black Swan Risks for Cattle Producers,"…

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Chris Clayton