Reps. Randy Feenstra, R-Iowa, and Wiley Nickel, D-N.C., introduced a bill last week intended give banks greater flexibility when issuing lines of credit to rural and agricultural borrowers.

The Access to Credit for our Rural Economy Act, or ACRE Act, would amend the IRS code of 1986. Interest received on certain loans secured by rural or agricultural real estate would be exempted from gross income. The exemption would also apply to single-family mortgage loans of less than $750,000 in rural communities of fewer than 2,500 residents.

If enacted, this year, the ACRE Act would go into effect in 2024. According to Feenstra, it would “level the playing field” for community banks to administer real estate loans. He cites an analysis by the American Bankers Association that projects the bill would expand access to agricultural and home loans in more than 4,000 rural communities. The ABA also estimates it would save famers and producers more than $400 million in annual interest expenses.

“Over the last few years, rising interest rates and record inflation have increased operating costs for our farmers, stifled young producers from entering agriculture, and prevented families in rural America from securing a home mortgage,” Feenstra says. “We need to give our main street lenders much-needed flexibility to offer agricultural and home loans at affordable rates to grow our rural communities.”

Multiple banking industry representatives have come out in support of the ACRE Act including the American Bankers Association, the Iowa Banking Association and the North Carolina Bankers Association.

Independent Community Bankers of America President and CEO Rebeca Romero Rainey says the bill is important legislation that will help rural communities struggling with higher interest rates. In a public statement endorsing the bill, she thanked Feenstra and Nickel for crafting what she considers to be a “common-sense-solution” benefitting rural American, particularly young, beginning and small-scale farmers and ranchers.

“With community banks making 80% of banking industry agricultural loans, ICBA strongly supports the ACRE Act to help community banks offer lower rates to certain rural borrowers and homeowners," Romero Rainey said.

The ACRE Act has been referred to the House Ways and Means Committee. There is no word yet on when it might be put before the House for a vote.