ACRE Act of 2025
- Bill Number
- S. 838
- Origin Chamber
- Senate
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-03-04: Read twice and referred to the Committee on Finance.
- Last Updated
- 2025-12-05T21:40:24Z
AI-Generated Summary
Purpose
The Access to Credit for our Rural Economy Act of 2025 (ACRE Act) aims to encourage lending to rural and agricultural sectors by excluding certain interest income from federal taxes. This tax break for lenders is intended to make credit more affordable and accessible for farmers, rural homeowners, and related businesses, supporting rural economies.
Key Provisions
- Tax Exclusion for Interest Income: Adds a new section (139J) to the Internal Revenue Code (IRC), excluding from a lender's gross income (the total income subject to tax) any interest earned on "qualified real estate loans." This applies to loans made after the bill's enactment.
- Qualified Lenders: Eligible lenders include:
- Banks and savings associations insured by the Federal Deposit Insurance Corporation (FDIC).
- State- or federally regulated insurance companies.
- Entities fully owned by U.S.-based bank holding companies or insurance holding companies.
- The Farm Credit System (a government-backed lender for agriculture) for loans on farmland.
- Qualified Real Estate Loans: Loans must meet these criteria:
- Secured by rural or agricultural real property, forestland, or a leasehold (a mortgage on leased land) on such property.
- Made to borrowers who are not "foreign adversary entities" (defined below).
- For single-family homes in rural areas, proceeds must be used to buy or improve the home, with total principal (loan amount) not exceeding $750,000 across all such loans.
- Refinancings (replacing old loans with new ones) do not qualify if they replace loans made before enactment.
- Definitions:
- Rural or Agricultural Real Estate: Includes land mainly used for growing crops or livestock; single-family homes that are the owner's primary residence in rural areas (as defined under existing farm credit laws); property used for fishing, seafood processing, or aquaculture (fish farming facilities like ponds or hatcheries).
- Foreign Adversary Entities: Borrowers from countries or entities including China (including Hong Kong and Macau), Cuba, Iran, North Korea, Russia, or Venezuela under President Nicolás Maduro; this covers governments, companies, or controlled persons from these places.
- Other Rules:
- Property status (rural/agricultural) is checked when interest is earned.
- These loans are treated as fully tax-exempt under IRC Section 265 (which disallows interest deductions on tax-exempt obligations).
- Requires the Treasury Secretary to report to Congress within 5 years on the provision's impact, including effects on loan interest rates.
- Effective Date: Applies to tax years ending after the bill's enactment; includes a clerical update to the IRC's table of contents.
Significant Changes to Existing Law
- Introduces a new, targeted tax exclusion for interest on rural/agricultural loans, which is not currently available. Under current law, all interest income is generally taxable for lenders, potentially discouraging such loans due to tax costs.
- Adds restrictions on lending to foreign adversaries, aligning with existing national security policies but applying them specifically to this tax benefit.
- No changes to borrower taxes; only lenders benefit from the exclusion.
Potential Impacts
- On Lenders and Credit Markets: By removing taxes on interest (which can be 21% or more for corporations), lenders may offer lower interest rates on these loans, increasing availability of financing for rural projects and reducing borrowing costs.
- On Citizens and Rural Areas: Farmers, rural homeowners, fishers, and aquaculture operators could access cheaper credit for land purchases, improvements, or operations, potentially boosting agricultural production, rural housing, and economic growth in underserved areas.
- On Government: Reduces federal tax revenue (exact amount unknown but tied to loan volumes); requires Treasury to conduct and report on an impact analysis, adding administrative work.
- On International Relations: Excludes loans to entities from designated adversarial countries, which could limit foreign investment in U.S. rural land from those nations and reinforce U.S. security policies without broader trade effects.
Main Stakeholders Affected
- Lenders: Banks, insurance companies, Farm Credit System, and related holding companies benefit from tax savings and may see increased business in rural lending.
- Borrowers: U.S. farmers, rural residents buying/improving homes, aquaculture and fishing businesses gain from potentially lower loan rates; foreign entities from adversarial countries are excluded.
- Rural Communities: Positive effects on local economies through easier access to capital for agriculture and housing.
- Government Agencies: Treasury Department (tax collection and reporting); Congress (receives impact report); FDIC and farm credit regulators (indirect oversight of qualified lenders).
- Taxpayers: Indirectly affected via reduced federal revenue, potentially shifting tax burdens elsewhere.
Notable Legal, Constitutional, or Political Implications
- Legal: Creates a narrow tax incentive under the IRC, consistent with Congress's broad authority to shape tax policy. The foreign adversary exclusion may raise compliance challenges (e.g., verifying borrower status) but builds on existing definitions in security laws. No direct conflicts with other IRC sections.
- Constitutional: Likely withstands challenges, as tax exemptions for specific economic sectors (like agriculture) are common and do not violate equal protection (rational basis: promoting rural development). The foreign exclusions align with national security powers under the Constitution.
- Political: Bipartisan sponsorship (from senators across parties) signals support for rural interests, a key voting bloc. Could influence farm policy debates but may draw criticism for tax cuts favoring specific industries amid budget concerns. The 5-year review provision allows for future adjustments based on data.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (9)
Sen. King, Angus S., Jr. [I-ME], Sen. Tuberville, Tommy [R-AL], Sen. Gallego, Ruben [D-AZ], Sen. Cramer, Kevin [R-ND], Sen. Marshall, Roger [R-KS], Sen. Rounds, Mike [R-SD], Sen. Coons, Christopher A. [D-DE], Sen. Ricketts, Pete [R-NE], Sen. McCormick, David [R-PA]
Recent Actions
- 2025-03-04: Read twice and referred to the Committee on Finance.
- 2025-03-04: Introduced in Senate
Bill Versions
- Access to Credit for our Rural Economy Act of 2025 — issued 2025-03-04 — PDF (7 pages)