La. Admin. Code tit. 7 § III-111

Current through Register Vol. 50, No. 11, November 20, 2024

Section III-111 - Maximum Amount of Agricultural Loans for Capital Expenditures

A.Section 103(b)(6) of the code restricts use of tax-exempt bonds to small issues, which thereby limits the principal amount of the corresponding loans. To determine whether a bond is eligible under the established limits, the code requires that certain sums be added to the principal amount of the bond. Therefore, the following amounts must be subtracted from the established limit to determine the maximum principal amount of bonds and corresponding loans:

1. $1,000,000 Limit. If:

a. the facilities to be financed with proceeds of LAFA bonds are located in the same incorporated municipality or in unincorporated areas of the same parish (i.e., the same political subdivision); and

b. the principal user as defined in §101 of the property financed by a prior bond issue was the borrower or a related person, the sum of the following may not exceed $1,000,000 (but see also §111. A 2):

i. the face amount of the bond to be issued; plus

ii. the remaining principal balance(s) of any loan(s) granted to the borrower or a related person of the borrower with proceeds of earlier bond issues (regardless of the issuer) which were exempt from taxation under Section 103(b)(6) of the code.

2. $10,000,000 Limit. If LAFA files the proper election with IRS, the maximum amount of LAFA bonds and corresponding loans may be increased to $10,000,000. In such event, the same qualifying factors (i.e., location of the property to be financed and identity of the principal user of bond proceeds) will apply, and the sum of the following may not exceed $10,000,000:

a. the face amount of the bond to be issued; plus

b. the remaining principal balance(s) of any loan(s) granted to the borrower or a related person of the borrower with proceeds of earlier bond issues (regardless of the issuer) which were exempt from taxation under Section 103(b)(6) of the code; plus

c. all capital expenditures on the property to be financed with bond proceeds which were paid or incurred during the six-year period beginning three years before and ending three years after the date of issuance of the bond, as follows:

i. capital expenditures which were financed other than out of the proceeds of a tax-exempt bond; and

ii. capital expenditures which are properly chargeable to the capital account of any person or state or local government unit (whether or not such person is the principal user or a related person), in which event capital expenditures are determined without regard to any rule of the code which permits expenditures properly chargeable to capital accounts to be treated as current expenses; plus

d. all other capital expenditures of any principal user in the political subdivision for which the bonds were issued.

3. The requirements of the code, as effective on the date of issuance of the bond and/or origination of the loan, shall determine the procedures to be followed with respect to all loans exceeding $1,000,000 in principal amount. If the requirements of the code are different from the requirements stated in this rule, the requirements of the code shall supersede this rule.

La. Admin. Code tit. 7, § III-111

Promulgated by the Department of Agriculture, Agricultural Finance Authority, LR 10:868 (November 1984).

AUTHORITY NOTE: Promulgated in accordance with R.S. 3:266, R.S. 3:270 and Section 103(b)(6) of the Internal Revenue Code of 1954, as amended.