Navigating the Legalities of Federal Farm Programs
The U.S. Department of Agriculture (USDA) administers a variety of federal farm programs to support farm income, assist farmers after disasters, and conserve natural resources. To ensure that farm program payments only go to farmers who are actively engaged in farming, the USDA tracks program payments through multi-person farming operations to each qualifying individual or entity. In other words, all farm program payments are directly attributed to each qualifying participant associated with a specific farming operation.
To qualify for payments under these programs, participants must have a three-year average adjusted gross income (AGI) below $900,000 and be in compliance with conservation requirements for highly erodible land and wetlands.
Additionally, program participants must meet three “actively engaged in farming” (AEF) criteria to be eligible for payments: the program participant must provide a significant contribution to the farming operation on a regular basis; the participant’s share of profit and losses must be proportional with their contribution to the farming operation, and the participant must share in the risk of loss from the farming operation.
Qualifying contributions include capital, equipment, or land; and active personal labor or active personal management. Each partner, stockholder, or member with an ownership interest must contribute active personal labor or active personal management to the farming operation on a regular basis.
The contribution must be identifiable, documentable, and separate and distinct from the contributions made by any other partner, stockholder, beneficiary, or member. However, certain landowners may be deemed in compliance with all AEF requirements without providing personal labor or management if they receive income based on the farm’s operating results or receive rent from the use of the land.
Most farm programs have an annual payment limit that applies to the accumulation of payments attributed to an individual associated with multiple farming operations. For family farm operations, every adult member (including first cousins, nieces, and nephews) will be deemed to meet the AEF requirements and be eligible to receive farm program payments in an amount up to the individual payment limit.
Likewise, if one spouse is actively engaged in farming, then the other spouse will be considered to have met the AEF requirement and be eligible to receive farm program payments.
A general partnership’s payment limit is equal to the limit for a single person times the number of partners. General partnerships comprised of non-family members must document the actions of the partners who make significant management contributions, and most will be limited to only one eligible partner based solely on the documented contribution of active personal management.
Corporations and LLCs are treated as a single person for purposes of determining eligibility and payment limits. Likewise, revocable trusts are combined with the grantor(s) of the trust and considered one person for payment limitation purposes. However, an irrevocable trust with two or more beneficiaries and a separate and distinct farming interest from the beneficiaries will be considered a separate person from the beneficiaries.
Current payment limits include a cumulative limit of:
$125,000 for all covered commodities under the Price Loss Coverage (PLC) and Agricultural Revenue Coverage (ARC) support programs
$50,000 for annual rental payments and incentive payments under the Conservation Reserve Program (CRP)
$500,000 per disaster event under the Emergency Conservation Program (ECP) and Emergency Forest Restoration Program (EFRP)
$200,000 under the Conservation Stewardship Program (CSP)
$450,000 under the Environmental Quality Incentives Program (EQIP)
$50,000 in Agricultural Management Assistance (AMA) funds.
Additionally, current payment limits for disaster assistance programs are $125,000 under the Livestock Forage Disaster Program (LFP), $125,000/$300,000 under the Noninsured Crop Disaster Assistance Program (NAP), and 1,000 acres under the Tree Assistance Program (TAP).
Woods Fuller attorneys are available and willing to help you navigate farm program payments and other operational questions. Contact Drew Driesen for expert ag help.