---
kind: "section"
citation: "26 U.S.C. § 139L"
title: "26"
title_heading: "Internal Revenue Code"
number: "139L"
heading: "Interest on loans secured by rural or agricultural real property"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/139L"
units:
  - "Subtitle A — Income Taxes"
  - "Chapter 1 — Normal Taxes and Surtaxes"
  - "Subchapter B — Computation of Taxable Income"
  - "Part III — Items Specifically Excluded from Gross Income"
---

# §139L. Interest on loans secured by rural or agricultural real property

- (a) **In general—** Gross income shall not include 25 percent of the [interest](/usc/26/856.md?p=f-1) received by a qualified lender on any qualified real [estate](/usc/26/1361.md?p=c-3) loan.
- (b) **Qualified lender—** For purposes of this section, the term “qualified lender” means—
  - (1) any bank or savings association the deposits of which are [insured](/usc/26/101.md?p=j-5-B) under the Federal Deposit Insurance Act ([12 U.S.C. 1811](/usc/12/1811.md) et seq.),
  - (2) any State- or federally-regulated insurance [company](/usc/26/812.md?p=a),
  - (3) any entity wholly owned, directly or [indirectly](/usc/26/101.md?p=a-3-B), by a [company](/usc/26/812.md?p=a) that is treated as a bank holding [company](/usc/26/812.md?p=a) for purposes of section 8 of the International Banking Act of 1978 ([12 U.S.C. 3106](/usc/12/3106.md)) if—
    - (A) such entity is organized, incorporated, or established under the laws of the [United States](/usc/26/993.md?p=g) or any State, and
    - (B) the principal place of business of such entity is in the [United States](/usc/26/993.md?p=g) (including any territory of the [United States](/usc/26/993.md?p=g)),
  - (4) any entity wholly owned, directly or [indirectly](/usc/26/101.md?p=a-3-B), by a [company](/usc/26/812.md?p=a) that is considered an insurance holding [company](/usc/26/812.md?p=a) under the laws of any State if such entity satisfies the requirements described in subparagraphs [(A)](#b-3-A) and [(B)](#b-3-B) of paragraph (3), and
  - (5) with respect to [interest](/usc/26/856.md?p=f-1) received on a qualified real [estate](/usc/26/1361.md?p=c-3) loan secured by real [estate](/usc/26/1361.md?p=c-3) described in [subsection (c)(3)(A)](#c-3-A), any federally chartered instrumentality of the [United States](/usc/26/993.md?p=g) established under section 8.1(a) of the Farm Credit Act of 1971 ([12 U.S.C. 2279aa–1(a)](/usc/12/2279aa–1.md?p=a)).
- (c) **Qualified real estate loan—** For purposes of this section—
  - (1) **In general—** The term “qualified real [estate](/usc/26/1361.md?p=c-3) loan” means any loan—
    - (A) secured by—
      - (i) rural or agricultural real [estate](/usc/26/1361.md?p=c-3), or
      - (ii) a leasehold mortgage (with a status as a lien) on rural or agricultural real [estate](/usc/26/1361.md?p=c-3),
    - (B) made to a person other than a specified [foreign entity](/usc/26/1473.md?p=5) (as defined in [section 7701(a)(51)](/usc/26/7701.md?p=a-51)), and
    - (C) made after the date of the enactment of this section.

    For purposes of the preceding sentence, the [determination](/usc/26/1313.md?p=a) of whether [property](/usc/26/317.md?p=a) securing such loan is rural or agricultural real [estate](/usc/26/1361.md?p=c-3) shall be made as of the time the [interest](/usc/26/856.md?p=f-1) income on such loan is accrued.

  - (2) **Refinancings—** For purposes of subparagraphs [(A)](#c-1-A) and [(C)](#c-1-C) of paragraph (1), a loan shall not be treated as made after the date of the enactment of this section to the extent that the proceeds of such loan are used to refinance a loan which was made on or before the date of the enactment of this section (or, in the case of any series of refinancings, the original loan was made on or before such date).
  - (3) **Rural or agricultural real estate—** The term “rural or agricultural real [estate](/usc/26/1361.md?p=c-3)” means—
    - (A) any real [property](/usc/26/317.md?p=a) which is substantially used for the production of one or more agricultural products,
    - (B) any real [property](/usc/26/317.md?p=a) which is substantially used in the [trade or business](/usc/26/1402.md?p=c) of fishing or seafood processing, and
    - (C) any aquaculture facility.

    Such term shall not include any [property](/usc/26/317.md?p=a) which is not located in a State or a possession of the [United States](/usc/26/993.md?p=g).

  - (4) **Aquaculture facility—** The term “aquaculture facility” means any land, structure, or other appurtenance that is used for aquaculture (including any hatchery, rearing pond, raceway, pen, or incubator).
- (d) **Coordination with section 265—** In the case of any qualified real [estate](/usc/26/1361.md?p=c-3) loan, [section 265](/usc/26/265.md) shall be applied—
  - (1) by treating any qualified real [estate](/usc/26/1361.md?p=c-3) loan for purposes of subsection (a)(2) thereof as an obligation the [interest](/usc/26/856.md?p=f-1) on which is wholly exempt from the taxes imposed by this subtitle,
  - (2) by substituting “25 percent of the [interest](/usc/26/856.md?p=f-1) on indebtedness” for “[Interest](/usc/26/856.md?p=f-1) on indebtedness” in such subsection (a)(2),
  - (3) by treating 25 percent of the adjusted basis of any qualified real [estate](/usc/26/1361.md?p=c-3) loan as adjusted basis of a [tax-exempt obligation](/usc/26/1275.md?p=a-3) described in subsection (b)(4)(B) thereof, and
  - (4) by substituting “25 percent of the amount of such indebtedness” for “the amount of such indebtedness” in subsection (b)(6)(A)(a)(ii)[^1] thereof.

## Footnotes

[^1]: So in original. Probably should be “(b)(6)(A)(ii)”.

## Source credit

(Added Pub. L. 119–21, title VII, § 70435(a), July 4, 2025, 139 Stat. 246.)

## Notes

### Editorial Notes

### References in Text

The Federal Deposit Insurance Act, referred to in subsec. (b)(1), is act Sept. 21, 1950, ch. 967, § 2, 64 Stat. 873, which is classified generally to chapter 16 (§ 1811 et seq.) of Title 12, Banks and Banking. For complete classification of this Act to the Code, see Short Title note set out under section 1811 of Title 12 and Tables.

The date of the enactment of this section, referred to in subsec. (c)(1)(C), (2), is the date of enactment of Pub. L. 119–21, which was approved July 4, 2025.

### Statutory Notes and Related Subsidiaries

### Effective Date

Pub. L. 119–21, title VII, § 70435(c), July 4, 2025, 139 Stat. 247, provided that: “The amendments made by this section [enacting this section] shall apply to taxable years ending after the date of the enactment of this Act [July 4, 2025].”