HB 2527, passed in the 2000 Kansas Legislative session, provides for a tax credit for lending
institutions which extend or renew agricultural production loans to eligible agricultural borrowers,
under certain conditions.
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The bill permits state and national banks, Production Credit Associations or institutions of the Farm
Credit Administration, which extend or renew agricultural production loans to "eligible agricultural
borrowers" at an interest rate that is at least 1% below the prime interest rate specified by the
banks for equally collateralized loans (or in the case of PCA's, at least 1% below the lowest
agricultural production loans being made by them), to claim a tax credit.
An "eligible agricultural borrower" includes a person, limited agricultural partnership, limited
liability agricultural company, or family farm corporation as defined in KSA 17-5903, if the
borrower:
- is located in the state of Kansas; and
- has an agricultural production loan which has been classified by any banking regulator or
designated loan committee of the lending institution, as substandard or doubtful.
The tax credit is limited both in the aggregate and per single loan. For banks, the aggregate tax
credit is based on interest rate reductions on the total principal amount not exceeding 15% of all
agricultural production loans for that bank's previous year (as shown on the Report of Condition
filed as of the previous December 31). Stated another way, the bank could take the tax credit up to
an amount that represented what the tax credit would be for 15% of all agricultural production loans
made for the previous year.
Further, the tax credit on any one loan can not exceed an amount equal to 3% per annum on the unpaid
principal balance of the loan. The tax credit for any taxable year would not be permitted to exceed
1/5 of the total tax credit allowed under this provision. The unused portion of the tax credit could
be used in future years as a carryover tax credit.
The tax credit became effective upon its publication in the Kansas Register, so that the credit could
be used for taxable years commencing after December 31, 1999, for any loans where the interest income
has been reduced, and which loans were made after the effective date of this act and prior to
July 1, 2004.
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