A state bank, national banking association, production credit association, or agricultural credit association chartered by the Farm Credit Administration which extends or renews an agricultural production loan to an eligible agricultural production borrower at an interest rate which is at least one whole percentage point (1%) less than the lowest interest rate made on loans with equivalent collateral or which reduces the rate of interest being charged on any outstanding agricultural production loan to an eligible agricultural borrower by at least one whole percentage point (1%) shall receive a credit against their tax liability. Extensions, renewals, or reduced interest rates based upon the variable interest provisions of the original loan do not qualify for the credit.
An eligible agricultural borrower means any individual, limited agricultural partnership, limited liability agricultural company or family farm corporation, as defined in K.S.A. 17-5903, and amendments thereto, located in the state of Kansas, having an agricultural production loan, which has been classified as substandard or doubtful by:
- any banking regulator, the farm credit administration or a district farm credit system institution which is subject to review by the farm credit administration; or
- the designated loan committee of such banking association prior to examination for classification eligibility by the banking regulator, the farm credit administration or a district farm credit system institution which is subject to review by the farm credit administration.
The total credit against tax liability will be the amount by which the interest income to the lender on and after July 1, 2000 and prior to July 1, 2004, has been reduced due to the reductions in rates of interest, except that the credit allowed as a result of an interest rate reduction on any one agricultural production loan shall not exceed an amount equal to 3 percent per annum on the unpaid principal balance of the loan. A credit for an interest rate reduction will be allowed for any one loan only when the eligible borrower can reasonably be expected to service the principal and interest for the term of such loan. The tax credit will be allowed for interest rate reductions on agricultural production loans having a total principal amount not exceeding 15 percent of the amount of such loans reflected in the lenders report filed with the Federal Deposit Insurance Corporation as of December 31, 1999 or with the Farm Credit Administration for calendar year 1999.
The credit may be claimed for taxable years commencing after December 31, 1999, and may be claimed every year thereafter until fully absorbed. The amount of credit allowable in any taxable year may not exceed 20 percent of the total allowable interest reduction credit. Any unused credit will be allowed as a carryforward except that the amount claimed in any one carryforward taxable year cannot exceed 20 percent of the total allowable interest reduction credit.
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