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Legal Opinion Summary
Topic:Incidental Authority/Excess Capacity: May a Farm Credit System association provide lease accounting services to other lenders?
ID Number:98-05
Issue Date:11/05/1998


An association provides lease accounting services to a non-Farm Credit System (FCS) lender (in addition to five other FCS institutions) to defray the expenses of purchasing and operating lease accounting software. OGC concluded that the association has incidental authority to engage in lease accounting for leases that it makes and is authorized to provide lease accounting services to others (including non-FCS lenders) pursuant to its incidental authority because it acquired excess lease accounting capacity in good faith.

Associations have express authority under sections 1.11(c)(2) and 2.4(b)(4) of the Farm Credit Act (Act) (12 U.S.C. 2019(c)(2) and 2075(b)(4)) to lease farming equipment or facilities to eligible borrowers. Lease accounting is not expressly authorized by the Act. However, the association is authorized by its incidental powers under sections 2.12(20) and 2.2(20) of the Act (12 U.S.C. 2093(20) and 2073(20)) to engage in lease accounting in order to exercise its leasing authority. The association acquired excess lease accounting capacity in good faith by purchasing a readily available software program that met its needs and is entitled to make full economic use of the software and to avoid the economic waste that would occur if the excess capacity was not utilized. This use of excess capacity is consistent with case law and Office of Comptroller of the Currency decisions involving national bank incidental powers.

(November 5, 1998)