Schedule K-51 - Kansas Agricultural Loan Interest Reduction Credit Page 2
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2GENERAL INFORMATION FOR CLAIMING THE INTEREST REDUCTION CREDIT
KANSAS SCHEDULES K-51 AND K-52
by the banking regulator, the farm credit administration or
K.S.A. 79-32,181 provides a credit against tax for interest rate
a district farm credit system institution which is subject to
reduction for agricultural production loan by production credit
review by the farm credit administration.
association. A state bank, national banking association, production
credit association, or agricultural credit association chartered by
The total credit against tax liability will be the amount by which
the Farm Credit Administration which extends or renews an
the interest income to the lender on and after July 1, 2000 and
agricultural production loan to an eligible agricultural production
prior to July 1, 2004, has been reduced due to the reductions in
borrower at an interest rate which is at least one whole percentage
rates of interest, except that the credit allowed as a result of an
point (1%) less than the lowest interest rate made on loans with
interest rate reduction on any one agricultural production loan shall
equivalent collateral or which reduces the rate of interest being
not exceed an amount equal to 3 percent (3%) per annum on the
charged on any outstanding agricultural production loan to an
unpaid principal balance of the loan. A credit for an interest rate
eligible agricultural borrower by at least one whole percentage
reduction will be allowed for any one (1) loan only when the eligible
point (1%) shall receive a credit against their tax liability.
borrower can reasonably be expected to service the principal and
Extensions, renewals, or reduced interest rates based upon the
interest for the term of such loan. The tax credit will be allowed for
variable interest provisions of the original loan do not qualify for
interest rate reductions on agricultural production loans having a
the credit.
total principal amount not exceeding 15 percent (15%) of the
amount of such loans reflected in the lender’s report filed with the
An “eligible agricultural borrower” means any individual, limited
Federal Deposit Insurance Corporation as of December 31, 1999
agricultural partnership, limited liability agricultural company or
or with the Farm Credit Administration for calendar year 1999.
family farm corporation, as defined in K.S.A. 17-5903, and
amendments thereto, located in the state of Kansas, having an
The credit may be claimed for taxable years commencing after
agricultural production loan which has been classified as
December 31, 1999, and may be claimed every year thereafter
substandard or doubtful by:
until fully absorbed. The amount of credit allowable in any taxable
year may not exceed 20 percent (20%) of the total allowable interest
(1) any banking regulator, the farm credit administration or a
district farm credit system institution which is subject to
reduction credit. Any unused credit will be allowed as a carryforward
review by the farm credit administration; or
except that the amount claimed in any one carryforward taxable
year cannot exceed 20 percent (20%) of the total allowable interest
(2) the designated loan committee of such banking
association prior to examination for classification eligibility
reduction credit.
INSTRUCTIONS FOR SCHEDULE K-51 AND K-52
A Schedule K-51 must be completed for each eligible agricultural
6. Using the information from the K-52 Worksheet, complete lines
borrower loan for which you are claiming an interest reduction
7 through 12 on Schedule K-52.
credit. A Schedule K-51 must be enclosed with Form K-40, K-120
7. In some instances a loan is paid off with more than one payment.
or Form K-130 for each year the credit is being claimed.
In this situation, the interest reduction credit should be based
Schedule K-52 must be completed for each year you are
upon the difference between the interest which would have
claiming an interest reduction credit. The schedule must be
accrued under the original interest rate, and the interest actually
enclosed with Form K-40, K-120 or Form K-130. When claiming a
accrued or paid at the reduced interest rate during the period
credit carryforward only, you should complete Schedule K-52, Lines
from July 1, 2003 to June 30, 2004. If there is more than one
7 through 12.
payment, the taxpayer should enclose additional computations
with Form K-51.
COMPLETION STEPS:
1. Complete lines 1 through 14 of Schedule K-51 for each and
For example, assume that a loan is extended, renewed, or
every loan for which an interest reduction credit is being
reduced on July 1, 2003. The principal balance is $100,000. The
claimed.
new interest rate is 8% and the original rate was 9%. On December
2. Compute lines 1 through 6a or 6b of Schedule K-52.
31, 2003, the farmer pays $50,000 of the principal to the bank
3. If line 4 of Schedule K-52 is less than line 3, complete line 6a.
along with accrued interest. On June 30, 2004, the remaining
If line 3 of Schedule K-52 is less than line 4, complete line 6b.
principal and accrued interest is paid. The interest reduction credit
4. If you are completing line 6b of Schedule K-52, you must reduce
would be $750 based on the following computations:
the total remaining principal balance on some or all of the loans
reported on Schedule(s) K-51. To do this, reduce the remaining
First Period interest Credit - (7-1-2003 to 12-31-2004):
principal balance on individual loans (line 10 of Schedule
$100,000
X
1%
=
$1,000
K-51) so that the total remaining principal balance of all loans
$1,000
X
6/12
=
$500
is equal to the amount shown on line 3 Schedule K-52.
Second Period Interest Credit – (1-1-2004 to 6-30-2004):
Recompute lines 10 through 14 on Schedule(s) K-51 for those
$50,000
X
1%
=
$500
loans where the remaining principal balance has been reduced.
$500
X
6/12
=
$250
5. Complete the K-52 Carry Forward Worksheet on the back of
Schedule K-52 if you are claiming a credit from a previous
Total Credit:
$500 + $250
=
$750
year.
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