Farm Bill Primer: Program Eligibility and Payment Limits

September 1, 2017 Farm Bill Primer: Program Eligibility and Payment Limits Since 1970, Congress has used varying policies to address the issue of who should be eligible for farm payments and how much should an individual recipient be permitted to receive in a single year. In recent years, congressional debate has focused on (1) ensuring that payments go to persons or entities currently engaged in farming, (2) attributing payments directly to individual recipients, (3) capping the amount of payments that a qualifying recipient may receive in any one year, and (4) excluding from payment eligibility those farmers or farming entities with incomes above a certain level as measured by their adjusted gross income (AGI). Most recently, the 2014 farm bill (Agricultural Act of 2014, P.L. 113-79) specified eligibility requirements for benefits under current farm programs and annual payment limits that vary across different combinations of farm programs. Federal farm support programs, along with their current eligibility requirements and payment limits, are listed in Table 1 (for more detail, see CRS Report R44739, U.S. Farm Program Eligibility and Payment Limits). Program Eligibility Some requirements are common across most programs, while others are specific to individual programs. Current eligibility requirements specific to each program participant but that affect multiple programs include the following:  identification of every participating person or legal entity—both U.S. and non-U.S.;  the nature and extent of an individual’s participation (i.e., actively engaged in farming criteria), including ownership interests in multi-person entities and personal time commitments (whether as labor or management);  conservation compliance provisions; and  means testing based on an AGI threshold. Is U.S. Citizenship Required? In general, if a foreign person or legal entity meets a program’s eligibility requirements, then they are eligible to participate. One exception is the permanent disaster assistance programs—Emergency Assistance for Livestock, Honeybees, and Farm-Raised Fish Program (ELAP), Livestock Forage Disaster Program (LFP), Livestock Indemnity Program (LIP), Tree Assistance Program (TAP), and the noninsured crop disaster assistance program (NAP)—under which non-resident aliens are excluded. Actively Engaged in Farming (AEF) Three categories of legal entities are subject to AEF requirements for program payment eligibility: an individual, a partnership, and a corporation. Individual. To be considered AEF, an individual must meet three criteria. First, the person makes a significant contribution to the operation of capital, equipment, or land and is also active though personal labor and/or personal management. Second, the person’s share of profits or losses is commensurate with their contribution to the operation. Third, the person shares in the risk of loss from the farming operation. If a married person meets the AEF requirements, any spouse will also be considered to have met the requirements, thus effectively doubling the individual payment limit. Another exception to AEF requirements is made for landowners provided they receive income based on the farm’s operating results. Partnership. Under a partnership, each member must individually meet all program requirements, including AEF and AGI requirements. Each qualifying member is potentially eligible for payments up to the individual limit. Corporation. A corporation is treated as a single person for purposes of determining eligibility and payment limits, provided that it meets the AEF and other eligibility criteria. Thus, a corporation is subject to a single payment limit. Conservation Compliance To be eligible for most farm program benefits, a producer agrees to maintain a minimum level of conservation on highly erodible land and not to convert or make production possible on wetlands. Collectively, these two provisions are referred to as conservation compliance (see CRS Report R42459, Conservation Compliance and U.S. Farm Policy). Adjusted Gross Income (AGI) Threshold Persons with combined farm and nonfarm AGI in excess of $900,000 are ineligible for most program benefits. AGI is measured from the previous three tax years, excluding the most recent taxable year. Direct Attribution and Payment Limits The process of tracking payments to an individual through various levels of ownership in single or multi-person legal entities—referred to as direct attribution—is critical for assessing an individual’s cumulative payments against their annual payment limit. Current law requires direct attribution through four levels of ownership in multi-person legal entities (see Table 1 for specific payment limits). Issues for Congress Eligibility requirements and payment limits strongly influence what size and type of farms are supported. Congress has debated what annual payment limit amount is optimal and whether the limit should be specific to each program or cumulative across all programs. Furthermore, program eligibility requirements and payment limits generate congressional interest because their effects differ across regions and by type of commodities produced, and because a substantial amount of annual U.S. farm program payments are at stake (see CRS Report R44914, Farm Safety-Net Payments Under the 2014 Farm Bill: Comparison by Program Crop). https://crsreports.congress.gov Farm Bill Primer: Program Eligibility and Payment Limits Table 1. Farm Program Eligibility Requirements and Payment Limitations Under the 2014 Farm Bill AEF U.S. Citizena AGI Limit Conservation Compliance PLC, ARC, LDP, and MLG payments (all commodities combined, except peanuts) Y N Y Y $125,000 per CY PLC, ARC, LDP, and MLG payments for peanuts Y N Y Y $125,000 per CY MLGs with commodity certificates or forfeiture Y N Y Y Unlimited Cotton Transition Assistance Program (CTAP) N N Y Y $50,000 per CY Sugar Program (implicit price support benefits) N N N N Unlimited Dairy Margin Protection Program (MPP) payments N N N Y Unlimited ELAP, LFP, and LIP (all three programs combined) N Y Y Y $125,000 per CY Tree Assistance Program (TAP) N Y Y Y $125,000 per CY Noninsured Crop Disaster Assistance Program (NAP) N Y Y Y $125,000 per CY N N N Y Unlimited Conservation Reserve Program (total rental payments) N N Y Y $50,000 per FY Conservation Stewardship Program (CSP) N N Y Y $200,000b Environmental Quality Incentives Program (EQIP) N N Y Y $450,000b Agricultural Management Assistance (AMA) N N Y Y $50,000 per CY Agricultural Conservation Easement Program (ACEP) N N Y Y Based on easement value Regional Conservation Partnership Program (RCPP) N N Y Y Subject to limitations of EQIP, CSP, & ACEP Emergency Conservation Program (ECP) N N Y Y $200,000 per disaster Emergency Forest Restoration Program (EFRP) N N Y Y $500,000 per disaster Emergency Watershed Protection Program (EWP) N N N Y Unlimited Y Y Y N $10,000 per CY Farm Program Type Payment Limit Commodity Programs Disaster Assistance Programs Crop Insurance Programs Premium subsidies and indemnity payments Conservation Programs Landscape Assistance Programs Miscellaneous Trade Adjustment Assistance for Farmers (TAAF) Source: Compiled by CRS from various sources. For details, see CRS Report R44739, U.S. Farm Program Eligibility and Payment Limits. Notes: Y implies that this is a necessary requirement for payment eligibility, N implies that it is not a necessary requirement. AEF = Actively Engaged in Farming criteria, AGI = Adjusted Gross Income limit, CY = crop year, FY = fiscal year, PLC = Price Loss Coverage, ARC = Agricultural Risk Coverage, LDP = Loan Deficiency Payment, and MLG = Marketing Loan Gain. a. U.S. citizenship or resident alien status required, assuming that any AEF requirements are met. b. All contracts combined for the entire period of FY2014-FY2018. Randy Schnepf, Specialist in Agricultural Policy Megan Stubbs, Specialist in Agricultural Conservation and Natural Resources Policy IF10722 https://crsreports.congress.gov Farm Bill Primer: Program Eligibility and Payment Limits Disclaimer This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material. https://crsreports.congress.gov | IF10722 · VERSION 2 · NEW