ACRE Act Aims to Reduce Borrowing Costs for Farmers
The cost of borrowing for farmers could see a significant decrease if legislation known as the Access for our Rural Economy (ACRE) Act comes into fruition. This initiative, backed by the American Bankers Association, is designed to alleviate some of the financial pressures faced by those in agriculture by making adjustments to the taxation on income earned from interest on farm real estate loans.
According to Ed Elfmann, the Senior Vice President of Agriculture and Rural Banking Policy at the American Bankers Association, the ACRE Act proposes a beneficial change for agricultural financing. By removing the tax on the income that banks earn from the interest on these loans, the Act aims to reduce the overall cost associated with putting together a loan package for borrowers.
“There are two main costs when a bank assembles a loan: the risk involved and the operational costs, which include taxes,” Elfmann explained. The ACRE Act’s approach to eliminate the taxation aspect is expected to directly impact the interest rates associated with farm real estate loans, rural home mortgages, and aquaculture endeavors.
The potential reduction in interest rates could be substantial, ranging from 50 to 150 basis points according to Elfmann’s insights. Such a decrease would significantly lower the financial barrier for those aiming to purchase land or invest in agriculture. Over the span of a loan’s term, which can often extend over decades, the savings on interest could profoundly affect a farmer’s bottom line.
The ACRE Act has garnered bipartisan support within both chambers of Congress, highlighting its relevance and the urgent need for solutions that support the agricultural sector. The current economic landscape presents numerous challenges for the farm economy, making the timing of the ACRE Act particularly critical. As lawmakers continue to review and discuss this proposed legislation, the agricultural community watches with hope for a positive change that could foster growth and stability across rural America.
The initiative is a step toward recognizing and addressing the unique financial hurdles faced by those who work the land. By easing the cost of borrowing, the ACRE Act promises not just to sustain but to invigorate rural economies, ensuring that the backbone of America’s food supply remains strong and resilient.
