The farm credit system's profits on agricultural loans are exempted from state level corporate income tax. We use the variation in state level corporate income tax rate to identify its effect on the farm credit system's farm debt share and its consequences on borrowing costs for the farm loan. We find that a 10 percent rise in state level corporate income tax is associated with 2.1 percent increase in FCS total farm debt market share. For a 10 percent rise in the farm credit system's total farm debt market share leads to a 0.07 percent increase in the estimated interest rate of total farm debt. Moreover, the state level farm financial measures are also crucial in determining the change in market share of farm credit system and interest rate on the agricultural loan.