AgWatch


USDA Tweaks Rather Than Strictly Tightens Farm Program Eligibility Rules

SARA WYANT

WASHINGTON, D.C.
   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.
   Yet, Ferd Hoefner with the National Sustainable Agriculture Coalition (NSAC) said the proposed rule is “fatally flawed and will result in very little change to the status quo,” basically throwing in the towel on one of President Obama’s top agricultural policy platform proposals. 
   Hoefner pointed out that, at the very top of his farm and rural platform in 2008, Candidate Obama wrote: "The lack of effective payment limitations has resulted in federal farm programs financing farm consolidation and the elimination of many mid-size family farms….Barack Obama and Joe Biden will close the loopholes that allow mega farms to get around the limits by subdividing their operations into multiple paper corporations.  They will take immediate action to close the loophole by proposing regulations to limit payments to active farmers who work the land….”
   Every President since Ronald Reagan has had the authority to close this loophole without additional action by Congress, but has failed to act, Hoefner added.
   However, Hoefner gives USDA credit because the proposed rule “does take a stab at tightening the farm management definition, requiring recordkeeping, and adding a quantifiable test.
   “This step in the right direction, however, is negated by the failure to apply the new test to anyone but a small slice of all farms,” Hoefner emphasized in his blog.
   Inside the proposed rule
   The proposed rule 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.
   Grassley weighs in
   Another long-time advocate of reform, 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.”
   Grassley said the farm bill conference committee exempted family farms from being affected by the new rulemaking – which appears to be a legitimate action – until you see how some family farms operate. 
   “As the GAO report from September 2013 pointed out, there are cases where family members living in South Florida have drawn farm subsidies for an operation under the ‘active personal management only’ designation for a farm operation located in the Midwest,” Grassley said. 
   He’s concerned that passage of future farm bills will continue to be more difficult unless farm programs can be more easily defended.
   “With the median income in America at around $52,000 per year, potentially paying more than a million dollars over the life of a farm bill to couples who aren’t even farming, doesn’t meet the common-sense test.  We need to have programs that are defensible to the American taxpayer and do not put young and beginning farmers at a disadvantage,” Grassley added.
   But not everyone is convinced that the new rules won’t hurt younger individuals 
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.
   Written comments on the proposed rule will be accepted at www.regulations.gov until May 26, 2015. The proposed rule is available at http://go.usa.gov/3C6Kk. ∆
   SARA WYANT: Editor of Agri-Pulse, a weekly e-newsletter covering farm and rural policy. To contact her, go to: http://www.agri-pulse.com/
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