Determination of rate of interest.

(1) The annual rate of interest applicable to this chapter shall be the adjusted rate established by the executive director of the Department of Revenue under subsection (2), except that the annual rate of interest shall never be greater than 12 percent.

(2) If the adjusted prime rate charged by banks, rounded to the nearest full percent, plus 4 percentage points, during either:

(a) The 6-month period ending on September 30 of any calendar year; or

(b) The 6-month period ending on March 31 of any calendar year,

differs from the interest rate in effect on either such date, the executive director of the Department of Revenue shall, within 20 days, establish an adjusted rate of interest equal to such adjusted prime rate plus 4 percentage points.

(3) An adjusted rate of interest established under this section shall become effective:

(a) On January 1 of the succeeding year, if based upon the adjusted prime rate plus 4 percentage points for the 6-month period ending on September 30; or

(b) On July 1 of the same calendar year, if based upon the adjusted prime rate plus 4 percentage points for the 6-month period ending on March 31.

(4) For the purposes of this section, “adjusted prime rate charged by banks” means the average predominant prime rate quoted by commercial banks to large business, as determined by the Board of Governors of the Federal Reserve System.

(5) Once established, an adjusted rate of interest shall remain in effect until an adjustment is made under subsection (2).