Are you a farmer or landowner “living on the edge?” That is, on the edge of being ineligible for any farm program payments in the 2008 Farm Bill? While many farmers have looked at the income thresholds and found themselves to be eligible, there may be other aspects of the eligibility that could put some on the outside looking in.

Iowa State University agricultural law specialists Roger McEowen, Kelvin Leibold, and Erin Herbold reviewed the payment eligibility provisions and summarized them in their latest analysis. They observe that the new rules have important planning implications for individuals and farming entities.

1) Farmland owned by the public which supports public schools is eligible for farm program payment payments unless the state has a population under 1.5 million. For the Cornbelt, that excludes North and South Dakota, as well as 9 other states.
2) USDA will cross check social security numbers twice per year with the Social Security Administration to ensure payments are not made to the deceased.
3) If you have previously failed to comply with the payment limitation rules, you are ineligible for 2 years, but that increases to 5 years if you have engaged in fraud.
4) The most significant change affects cash rent tenants, and the Iowa State specialists say, “The cash rent tenant rule stays essentially the same, with clarification that a tenant under a cash lease who renders personal management, but not personal labor, is eligible for payments if the tenant makes a significant contribution of equipment.”
5) The “active engagement” test is important because it determines payment eligibility. Those who are “actively engaged” include: landowners whose contributed share is at risk; adult family members contributing labor or management; sharecropper with a contribution at risk; hybrid seed growers; recipients of custom farming services; a non-farming spouse with an ownership share at risk.
6) Regardless of acreage or yield variables, the Direct Payment maximum is $40,000, which will be adjusted downward by 20% or to $32,000 in the case of ACRE participation.
7) Regardless of acreage or yield variable, the Counter-cyclical payment maximum is $65,000, which will be adjusted downward by 20% in the case of ACRE participation.
8) There is no limitation on the amount of Loan Deficiency Payments that can be received; however, the loan rate will be lowered by 30% in the case of ACRE participation. Additionally, the marketing loan program is not subject to payment limitation.
9) The ACRE program reduces direct payment rates by 20%; loan rates by 30% and eliminates eligibility for counter-cyclical payments. Producers with multiple farms, and with one farm in ACRE and another out of ACRE, there is a $65,000 limit on ACRE and counter-cyclical payments.
10) The upper limits on income have been reset for farm program payment eligibility. For price support program a producer’s adjusted gross income must be less than $500,000 for direct and counter-cyclical payments, and an adjusted gross farm income under $750,000 for direct payments. For conservation payments, the adjusted gross non-farm income must be under $1 million, unless two-thirds of the adjusted gross income is from farming. The adjusted gross income is a three year average with the FSA requiring annual certifications from each individual or entity requesting farm program payments.
11) With the abolition of the three-entity rule, all farm program payments are now keyed to social security numbers, which eliminates the necessity of determining “a person.”
12) Both individuals in a marriage may also qualify, if they are both contributing to the operation with labor, management, or land ownership that is at risk.

Summary:
USDA’s new eligibility rules for farm program payments have reduced the potential for payments per individual because of using social security numbers, but have also clarified how individuals are actively engaged in farming. While payments can still be received under the conventional farm programs, as well as the new ACRE program, the limits under ACRE will be reduced. Changes have also occurred to ease the conflict with payments to cash rent tenants under the former farm program.