II 

109TH CONGRESS 

1ST SESSION S. 238 

To amend the Internal Revenue Code of 1986 to exclude from gross income 

interest received on loans secured by agricultural real property. 

IN THE SENATE OF THE UNITED STATES 

FEBRUARY 1, 2005 

Mr. HAGEL introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 to exclude 

from gross income interest received on loans secured 

by agricultural real property.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Rural Economic In5 vestment Act of 2005’’. 

6 SEC. 2. EXCLUSION FOR INTEREST ON LOANS SECURED BY 

7 AGRICULTURAL REAL PROPERTY. 

8 (a) IN GENERAL.—Part III of subchapter B of chap9 ter 1 of the Internal Revenue Code of 1986 (relating to 
2

•S 238 IS

1 items specifically excluded from gross income) is amended 

2 by inserting after section 139A the following new section: 

3 ‘‘SEC. 139B. INTEREST ON LOANS SECURED BY AGRICUL4 TURAL REAL PROPERTY. 

5 ‘‘(a) EXCLUSION.—Gross income shall not include in6 terest received by a qualified lender on any qualified real 

7 estate loan. 

8 ‘‘(b) DEFINITIONS.—For purposes of this section— 

9 ‘‘(1) QUALIFIED LENDER.—The term ‘qualified 

10 lender’ means any bank or savings association the 

11 deposits of which are insured under the Federal De12 posit Insurance Act (12 U.S.C. 1811 et seq.). 

13 ‘‘(2) QUALIFIED REAL ESTATE LOAN.—The 

14 term ‘qualified real estate loan’ means any loan se15 cured by agricultural real estate or by a leasehold 

16 mortgage (with a status as a lien) on agricultural 

17 real estate. For purposes of the preceding sentence, 

18 the determination of whether property securing such 

19 loan is agricultural real estate shall be made as of 

20 the time the interest income on such loan is accrued. 

21 ‘‘(3) AGRICULTURAL REAL ESTATE.—The term 

22 ‘agricultural real estate’ means— 

23 ‘‘(A) real property used for the production 

24 of 1 or more agricultural products, and 

25 ‘‘(B) any single family residence— 
3

•S 238 IS

1 ‘‘(i) which is the principal residence 

2 (within the meaning of section 121) of its 

3 occupant, 

4 ‘‘(ii) which is located in a rural area 

5 (as determined by the Secretary of Agri6 culture), which is not within a Metropoli7 tan Statistical Area (as defined by the Of8 fice of Management and Budget) and 

9 which has a population (determined on the 

10 basis of the most recent decennial census 

11 for which data are available) of 2,500 or 

12 less, and 

13 ‘‘(iii) which is purchased or improved 

14 with the proceeds of the qualified real es15 tate loan. 

16 ‘‘(c) COORDINATION WITH SECTION 265.—Qualified 

17 real estate loans shall be treated as obligations described 

18 in section 265(a)(2) the interest on which is wholly exempt 

19 from the taxes imposed by this subtitle.’’. 

20 (b) CLERICAL AMENDMENT.—The table of sections 

21 for such part III is amended by inserting after the item 

22 relating to section 139A the following new item:

‘‘Sec. 139B. Interest on loans secured by agricultural real property.’’.
4

•S 238 IS

1 (c) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 the date of the enactment of this Act.

Æ