WASHINGTON, March 25, 2015 – USDA finally announced a proposed rule – authorized in the 2014 farm bill - to limit farm payments to people who are “actively engaged” in farming, potentially closing a loophole in non-family farm businesses that allows some larger joint ventures and general partnerships to receive additional government payments. Long-time advocates of reform say the changes don’t go nearly far enough, while others worry that the reforms may limit the ability for existing farmers to bring younger non-family partners into the business.
"We want to make sure that farm program payments are going to the farmers and farm families that they are intended to help. So we've taken the steps to do that, to the extent that the Farm Bill allows," Agriculture Secretary Tom Vilsack said in a release announcing the proposed rule.
The proposal would revise and clarify the requirements for a significant contribution of active personal management to a farming operation. It also would set a limit of one person per farming operation who may qualify based on a contribution of active personal management, with exceptions for up to three persons for large and complex farming operations if additional requirements are met. This rule does not change the payment limit per person, which is a joint $125,000 for the applicable programs, according to USDA.
To qualify for three farm managers, the operation would have to meet new standards for both size and complexity. The default standard for a large farming operation would have crops on more than 2,500 acres (planted or prevented planted) or honey or wool with more than 10,000 hives or 3,500 ewes, respectively, with state Farm Service Agencies having some flexibility with the definition.
Under the proposed rule, non-family joint ventures and general partnerships must document that their managers are making significant contributions to the farming operation, defined as 500 hours of substantial management work per year, or 25 percent of the critical management time necessary for the success of the farming operation. The changes specified in the rule would apply to payment eligibility for 2016 and subsequent crop years for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs, loan deficiency payments and marketing loan gains realized via the Marketing Assistance Loan Program.
Only non-family farm general partnerships or joint ventures comprised of more than one member will be impacted by this proposed rule. USDA notes that about 1,400 joint operations could lose eligibility for around $50 million in total crop year 2016 to 2018 benefits -- ranging from $38 million for the 2016 crop year down to approximately $4 million for the 2018 crop year.
Sen. Chuck Grassley, R-Iowa, said the proposed rule “is not as stringent as the Farm Bill amendment I authored that was approved by majority votes in both bodies of Congress.” However, he described the rule “as a small step in the right direction.”
Another long-time advocate for reform, Ferd Hoefner with the National Sustainable Agriculture Coalition (NSAC), expressed disappointment that candidate Barack Obama’s 2007 campaign pledge to tighten loopholes has still not been addressed.
“Sadly, the proposed changes to the “actively engaged in farming” rules amount to very little in the way of real reform, missing the best chance yet for President Obama to make good on his number one agricultural policy platform proposal…..Continuing to allow for payment limit abuse to foster mega farms is unacceptably bad public policy.”
Traci Bruckner, senior associate at the Center for Rural Affairs, said the proposed rule is “not reform” and suggested that USDA is “clearly more interested in defending the interests of mega-farms by preserving loose definitions that will continue to allow the nation’s largest farms to avoid meaningful payment limits.”
Wayne Myers, a principal with the legal and accounting firm Kennedy and Coe, agreed that not too many of his firm’s farm clients would likely be impacted by the rule, but expressed concerns about the definition of “large” farms and the way USDA is attempting to qualify management. He said the proposal could make it more difficult for producers who don’t have children coming back to the farm, but would like to bring a younger employee into the business.
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