The One Big Beautiful Bill (OBBB) adds a few new provisions targeted to help rural and agricultural America. This update provides an overview of a few of these new provisions as a part of Parsons Behle & Latimer’s (Parsons) weekly updates to address the major tax changes from the OBBB. Please join Parsons on Aug. 21, 2025, at One Utah Center, Salt Lake City from 8:30 a.m. -1 p.m. at its upcoming seminar which will provide a deeper dive into the OBBB and the practical implications of its key provisions. Registration is free and open now!
Deduction for Interest Secured by Rural and Agricultural Land: The OBBB reduces the income tax on certain new loans that are secured by rural or agricultural property. The 25% exclusion should theoretically translate to lower interest rates—perhaps as much as 50 basis points, for qualifying loans. Many loans will qualify for the deduction, so it is critical that borrowers and lenders start to consider the changed economics provided by the provision in the context of lending negotiations.
To qualify:
1. The loan must be from a qualified lender, which are banks and savings associations (insured under the Federal Deposit Insurance Act); state- or federally-regulated Insurance companies; and federal agricultural mortgage corporations.
2. The loan must be secured by rural or agricultural real estate (real property which is substantially used for the production of one or more agricultural products, fishing or seafood processing or aquaculture facility). It is likely that additional guidance will be issued on which properties qualify.
Installment Payment Election for Sale of Farmlands: Effective for sales/exchanges of farmlands in taxable years beginning after July 4, 2025 (EFFECTIVE 2026 for calendar year taxpayers), the OBBB creates a new election for taxpayers who sell or exchange qualified farmland property located in the United States (farmland used as a farm for the previous 10 years and subject to restrictions for the next 10 years to restrict the land for farm use) to qualified farmers (individuals actively engaged in farming). Taxpayers may elect to pay gain from the sale or exchange of qualified farmland over four equal installments even though the entire proceeds are received in a single year. Taxpayers will be able to make the election by the due date of the initial tax return and elections will be on an individual partner or shareholder basis. Given the requirements and restrictions, it is not clear how useful this provision will be or how much tax value the provision will create.
Qualified Opportunity Zones: Starting Jan. 1, 2027, the OBBB creates a new framework for Qualified Opportunity Zones (QOZs). Within this new framework, there are new incentives for “rural” areas (census tracts that do not contain nor are adjacent to cities and towns with populations greater than 50,000 people). See Parsons’ previous alert for more details regarding the changes to QOZs, linked here.
Low-Income Housing Credit & New Markets Tax Credit: Effective Jan. 1, 2026, the Low-Income Housing Credit (IRC § 42) lowers the bond financing threshold to 25%, if at least 5% of aggregate costs are financed by bonds issued after Dec. 31, 2025, for buildings placed in service in taxable years after Dec. 31, 2025. Also, effective Jan. 1, 2026, the OBBB permanently extends the New Markets Tax Credit (IRC § 45D) and creates a new five-year carryover for any unused limitation (previously, no carryforward past 2030).
Again, Parsons’ upcoming OBBB seminar on Aug. 21, 2025, will offer a deeper dive into these developments and their practical implications. Registration is available now. In the meantime, we encourage individuals and businesses to review Parsons’ posted updates and engage with our team to navigate this new era of tax law effectively.
