(LOOTPRESS) – The Internal Revenue Service has released a significant new piece of guidance that could reshape lending in rural America — including right here in West Virginia. On November 20, 2025, the IRS and U.S. Treasury issued Notice 2025-71, providing interim rules for how lenders may qualify for a new federal tax benefit tied to loans secured by rural or agricultural real estate.
The guidance stems from Section 139L of the Internal Revenue Code, created under the One Big Beautiful Bill Act signed into law on July 4, 2025. The provision allows certain lenders to exclude 25% of interest income from federal taxation on qualifying loans made on or after July 4, 2025.
While this may seem like a niche tax provision, the real-world impact on rural lending could be substantial — and West Virginia, with its agricultural counties, family-owned farms, and large amounts of rural property, is directly affected.
What Section 139L Does
Section 139L offers a tax exclusion equal to 25% of the interest income a lender earns on a “qualified real estate loan.” To qualify:
The goal:
Lower the cost of credit and expand loan availability in rural communities.
What the November 20 Guidance Adds
The new IRS notice provides temporary but crucial guidance lenders may rely on until final regulations are issued. Highlights include:
1. Clarification of rural and agricultural property definitions
The IRS outlines what qualifies as rural or agricultural real property, including treatment of mixed-use parcels.
2. The 80% safe harbor rule
If the fair market value of the collateral property is at least 80% of the loan’s issue price, the loan can be treated as fully qualifying. This dramatically simplifies compliance.
3. Refinancing rules
Only the “new money” portion of a refinance automatically qualifies. Older principal generally does not.
4. How long the guidance lasts
Lenders may rely on Notice 2025-71 until 30 days after the forthcoming proposed regulations are published.
What This Means for West Virginia
1. More competitive rural lending
With a 25% interest-income exclusion, community banks and regional lenders may be able to offer:
2. Big advantages for community banks
West Virginia’s financial landscape is dominated by local and regional banks. These lenders could benefit the most from:
3. Easier access to capital for farms and rural families
Expect potential improvements in:
4. More emphasis on accurate appraisals
Because qualification relies heavily on fair-market value, lenders will likely increase:
5. Public comments are open until January 20, 2026
This is the opportunity for banks, farm groups, realtor associations, appraisers, and rural development organizations to influence the final regulations.
Submit public comments here:
(Once on the site, simply enter “Notice 2025-71” into the search bar to access the IRS comment docket.)
The November 20 guidance is only the first step. Full proposed regulations are expected in 2026. In the meantime, lenders should:
For rural West Virginia, where financing often determines whether a farm grows or a family keeps its land, this new tax benefit could be a major catalyst.
