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Senators: change payment limit rules

USDA officials erred when they wrote the new interim final rule for payment limits and should rescind it before it “adversely affects producers and farm operations from coast to coast,” a group of senators said.

That charge — contained in a letter written to Agriculture Secretary Tom Vilsack — is likely to draw a hearty amen from farmers who have expressed dismay over the new actively engaged language in the rule.

The letter was written by Saxby Chambliss, ranking member, Blanche Lincoln, chairman of the Subcommittee on Production, Income Protection and Price Support, and 21 other members of the Senate Committee on Agriculture, Nutrition and Forestry and farm-state representatives.

Vilsack, the former governor of Iowa who became agriculture secretary Jan. 20, has extended the comment period for the interim final payment limitation rule for 60 days because of the confusion surrounding the regulation. The interim final rule was written during the final days of the Bush administration.

The letter writers say the interim rule reflects the significant changes to farm program payment limitation and payment eligibility that were included in the 2008 farm bill.

“However, the interim rule strays beyond congressional intent and the statute in several areas that have the potential to adversely affect producers and farm operations from coast to coast,” including those in Chambliss’ state of Georgia and Lincoln’s Arkansas.

“Although the 2008 farm bill contained significant reform with the elimination of the three-entity rule, direct attribution, and stricter adjusted gross income tests, we would particularly note that the statutory language did not require or direct USDA to make any changes to the “actively-engaged” determination for individuals and entities in farming except in the case of a spouse.”

The 2008 farm bill eliminated the discrimination against spouses being considered as equal farming partners, they said. Many wives play critical roles in the operation of family farms, but the existing rules make no allowance for those activities.

“Unfortunately instead of clarifying the law, it appears the interim rule makes significant changes that do not follow the statute to actively engaged determinations and other critical eligibility requirements. These unnecessary changes generate more legal questions and confusion regarding actively engaged, and we ask that those changes be withdrawn or clarified in a timely manner.”

While he was in office, President Bush and other administration officials made no secret of the fact they wanted more stringent limits on payments. The administration’s farm bill proposal would have reduced the adjusted gross income cap to $200,000 per individual.

After passing the farm bill twice to override presidential vetoes, congressional leaders said they expected USDA to draft the rule implementing the new payment limit provisions by September. Instead, administration officials finally released them on Dec. 23.

Since then, large numbers of farmers have complained that the new rules leave many unanswered questions about what constitutes being actively engaged. An attorney writing to Delta Farm Press identified two areas of concern.

The first is the requirement that all stockholders (owners of a company) be active so as not to get any benefit from a “passive owner,” he said.

“Operators must determine whether they want the passive owner to become active, and, if so, how. Is there enough substantive work to go around? If not, then the passive owner may have to be taken out of the company, which gives rise to tax and money issues.”

The second is the requirement that active owners’ contributions of labor or management must be regular and substantial, and “documented. The documented part is the trap here,” he said. “The nature and extent of the documentation will depend on the size of the operation and the particular activity. But this should be sorted out going into the year, not after the fact.

“Each of these items mentioned may not be that big of an issue to address. But a lot of farmers should be asking their lawyers and accountants these questions at the same time, and there is not much time to get all this business in order.”

The original comment period for the interim rule was set to end on Jan. 28. Extending the deadline by 60 days should enable farmers and their organizations to make comments through the end of March.

“The extended comment period still provides USDA with adequate time to make changes to the interim rule for the 2009 crop year,” the letter said. The deadline to sign up for the 2009 Direct and Counter-Cyclical Program (DCP) and Average Crop Revenue Program (ACRE) is June 1.

“Producers across this country are in the process of making decisions for the 2009 crop year and the interjection of unwarranted changes to the farm program payment limitation and payment eligibility final rule will only result in uncertainty and confusion to all of our producers,” it said. “We request that you follow through on your statement in regard to this rule as well as other farm bill provisions awaiting implementation.”

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TAGS: Legislative
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