(1) Each production credit association shall pay annually to the commissioner of revenue the specified privilege tax provided under this part, which tax is to be measured by the income of the association, and shall be computed at the rate of three and three fourths percent (3.75%) of the net receipts of the association.
(2) Net receipts shall be computed on an accrual basis and are defined to be the gross receipts from the following sources: Interest on loans;
(3) Loan service fees;
(4) Interest on securities unless by law otherwise tax exempt;
(5) Compensation or fees or services performed;
(6) Capital gains from the sale of real and personal property; and
(7) Other receipts; LESS
(8) Patronage refunds; and
(9) All expenses of the association, which expenses shall include, in addition to the usual and normal expenses of operation: (a) Bad debts charged off; or (i) (a) Bad debts charged off; or
(10) Annual additions for valuation reserves against loan assets in an amount equal to one half of one percent (0.5%) of the loans outstanding at the end of the fiscal year, to the extent that earnings in the year in excess of other operating expenses permit, until the reserves are equal to, but are not in excess of, three and one half percent (3.5%) of loans outstanding at the end of the fiscal year, whichever sum is greater;
(11) Interest paid or accrued;
(12) Legal recording and abstract fees;
(13) Depreciation on capital assets;
(14) Federal, county and city taxes paid or accrued;
(15) Operating expenses on acquired property;
(16) Capital losses; and
(17) Other ordinary and necessary items of expense.