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About RBCST version 4.1

FCA’s Office of Secondary Market Oversight revised RBCST version 4.0 in April 2018 to reflect changes to the corporate tax code. The Tax Cuts and Jobs Act of 2017, which was signed into law in December 2017, changed the corporate tax code by imposing a flat tax rate of 21 percent on all income over $50,000.

We revised the RBCST 4.0 to reflect this change. This involved changing rows 74 through 82 on the Assumptions & Relationships spreadsheet of the RBCST. 

In version 4.0, the rows were as follows. (Note: Dollars are in thousands.)

Income over but less than Tax is: Tax rate of the amount over
$- $50 $- 15% $-
$50 $75 $7.50 25% $50
$75 $100 $13.75 34% $75
$100 $335 $22.75 39% $100
$335 $10,000 $113.90 34% $335
$10,000 $15,000 $3,400.00 35% $10,000
$15,000 $18,333 $5,150.00 38% $15,000
$18,333   $- 35% $-

In version 4.1, the rows have changed to the following:

Income over but less than Tax is: Tax rate of the amount over
$- $50 $- 15% $-
$50 $75 $7.50 21% $50
$75 $100 $12.75 21% $75
$100 $335 $18.00 21% $100
$335 $10,000 $67.35 21% $335
$10,000 $15,000 $2,097.00 21% $10,000
$15,000 $18,333 $3,147.00 21% $15,000
$18,333   $- 21% $-

RBCST 4.1 was used for the first time for the first quarter of 2018. For that quarter, the effect of the tax rate change on the RBCST was to increase the capital requirement. We expect this will generally be the case for future quarters because the new lower tax rate reduces the amount of tax benefit derived from tax losses carried forward.

Since this was merely a technical change to the RBCST — not a substantive one, no FCA board action was required, and the agency was not required to adopt a rule to implement the change.

The Office of Secondary Market Oversight designed and maintains the RBCST for the use of Farmer Mac. FCA regulations found at § 652.65(a)(3) of title 12 require the RBCST to apply the appropriate corporate income tax schedule.

Page updated: June 08, 2018