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USDA enacts changes to payment limitations

Wednesday, December 31, 2008

According to Clay Cunty USDA Farm Service Agency Executive Director Nancy Ireland, with the publication of an interim final regulation recently in the Federal Register, the United States Department of Agriculture (USDA) announced changes to both Adjusted Gross Income (AGI) qualifications, program payment limitations, and direct attribution for FSA and Natural Resources Conservation Service (NRCS) programs, which became effective in accordance with the 2008 Farm Bill.

Public comments on this interim final rule must be submitted to the Department within 30 days of the date of publication.

"Changes to program participation rules and qualifying income requirements will make farm program payments more defendable to America's taxpayers," stated Ireland. "This is a step in the right direction to ensuring that program benefits are targeted to active qualifying farmers and ranchers."

For commodity and disaster programs, the AGI limitation was reduced from $2.5 million AGI from all sources to a three-year average non-farm AGI of $500,000 such that a person or entity shall not be eligible for such programs if the non-farm AGI exceeds $500,000. also, under the new regulations, an individual or entity must have a new three-year average AGI less than or equal to $750,000 per year from farm income in order to qualify for direct payments issued under the Direct and Counter-cyclical Program.

The definition of income derived from farming, ranching and forestry operations was expanded to include, among other items, such items as the packing, storing and transporting of agricultural commodities; production of livestock products; farm-based production of renewable bio-energy; and in some instances; the providing of operational inputs to farmers, ranchers and foresters.

For conservation programs, the average non-farm AGI limitation is $1 million or less for eligibility. However, an individual or entity who has non-farm AGI excess of $1 million remains eligible for conservation programs only if 66.66 percent or more of the total AGI is derived from farming, ranching and forestry operations. In addition, the AGI is derived from farming, ranching and forestry operations. In addition, the AGI limitation for conservation programs may be waived on a case-by-case basis if it is determined that environmentally sensitive land of special significance would be protected.

Program payments are limited by direct attribution to individuals or entities. A legal entity is defined as an entity created under Federal or State law that own land or an agricultural commodity, product or livestock. Through direct attribution, payment limitation is based on the total payments received by the individual, both directly and indirectly. Qualifying spouses are eligible to be considered separate persons for payment limitation purposes, rather than being automatically combined under one limitation.

States, local governments, political subdivisions, and other agencies were eligible for payments prior to enactment of the 2008 Act. The 2008 Act and this rule make such jurisdictions ineligible for payments unless such payments are earned on State-owned land and are used to support public schools. Payments under this exception are limited to $500,000 annually; the limitation is waived for a State that has a population of less than 1.5 million.

Individuals and entities must be "actively engaged in farming" with respect to a farming operation in order to be eligible for specified payments and benefits.

To be "actively engaged in farming," the individual or entity must make significant contributions to the farming operation of: (1) capital, equipment, land, or a combination; and (2) personal labor or active personal management, or a combination.

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