[Federal Register: December 29, 2008 (Volume 73, Number 249)]
[Rules and Regulations]
[Page 79267-79284]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr29de08-1]
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Rules and Regulations
Federal Register
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[[Page 79267]]
DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR 1400
RIN 0560-AH85
Farm Program Payment Limitation and Payment Eligibility for 2009
and Subsequent Crop, Program, or Fiscal Years
AGENCY: Commodity Credit Corporation, USDA.
ACTION: Interim rule.
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SUMMARY: The Commodity Credit Corporation (CCC) is revising regulations
as required by the Food, Conservation, and Energy Act of 2008 (the 2008
Farm Bill) to make changes in payment eligibility, payment attribution,
maximum income limits, and maximum dollar benefit amounts for
participants in CCC-funded programs. This interim rule amends the
regulations to ensure that program payments and benefits are issued
only to those persons and entities that meet all eligibility
requirements, that a program participant does not receive any program
payment above the maximum allowable benefit amount, and that applicable
payments are not made to anyone whose average adjusted gross income
exceeds the maximum dollar amounts established by the 2008 Farm Bill.
This interim rule will apply to 2009 and subsequent crop, program, or
fiscal year benefits for programs subject to the provisions in our
regulations.
DATES: Effective Date: This rule is effective December 23, 2008.
Comment Date: We will consider comments that we receive by January
28, 2009.
ADDRESSES: We invite you to submit comments on this interim rule. In
your comment, include the volume, date, and page number of this issue
of the Federal Register. You may submit comments by any of the
following methods:
E-Mail: Salomon.Ramirez@wdc.usda.gov.
Fax: (202) 690-2130.
Mail: Salomon Ramirez, Director, Production, Emergencies
and Compliance Division, FSA, U.S. Department of Agriculture (USDA),
Stop 0517, Room 4752, 1400 Independence Ave., SW., Washington, DC
20250-0517.
Hand Delivery or Courier: Deliver comments to the above
address.
Federal eRulemaking Portal: Go to http://
www.regulations.gov. Follow the online instructions for submitting
comments.
Comments may be inspected at the mail address listed above between
8 a.m. and 4:30 p.m., Monday through Friday, except holidays. A copy of
this interim rule is available through the Farm Service Agency (FSA)
home page at http://www.fsa.usda.gov/.
FOR FURTHER INFORMATION CONTACT: Salomon Ramirez, Director, Production,
Emergencies and Compliance Division, FSA, USDA, Stop 0517, 1400
Independence Ave., SW., Washington, DC 20250-0517. Telephone: (202)
720-7641. Electronic mail: Salomon.Ramirez@wdc.usda.gov. Persons with
disabilities who require alternative means for communication (Braille,
large print, audio tape, etc.) should contact the USDA Target Center at
(202) 720-2600 (voice and TDD).
SUPPLEMENTARY INFORMATION:
Background
This rule implements provisions in sections 1603 and 1604 of the
2008 Farm Bill (Pub. L. 110-246) concerning payment eligibility and
payment limits for participants in CCC-funded programs. The 2008 Farm
Bill provides new eligibility requirements based on annual income,
sources of income, and type of entity. This rule amends 7 CFR part 1400
to implement these changes.
Applicability of Part 1400
The applicability of part 1400 is amended as required by the 2008
Farm Bill to include new programs authorized by the 2008 Farm Bill.
These changes are specified in Sec. 1400.1, ``Applicability.'' All of
the amendments made by this rule apply to the 2009 and subsequent crop,
program, or fiscal years.
Payment Eligibility--Annual Income and Sources of Income
The 2008 Farm Bill provides that, notwithstanding any other
provision of law, a person or legal entity is not eligible to receive
commodity program benefits such as direct payments and counter-cyclical
payments or Average Crop Revenue Election (ACRE) program payments if
the average adjusted gross income (AGI) of the person or legal entity
from nonfarm sources exceeds $500,000. Similarly, a person or legal
entity is not eligible for direct payments if the average adjusted
gross income from farming, ranching, and forestry operations of the
person or legal entity exceeds $750,000. A person or legal entity is
ineligible for conservation program benefits or payments if the average
adjusted gross nonfarm income of the person or legal entity exceeds
$1,000,000, unless not less than 66.66 percent of the adjusted gross
income of the person or legal entity is derived from farming, ranching,
and forestry operations, as determined by the Secretary. As required by
the 2008 Farm Bill, this rule provides that with respect to programs
administered by FSA the Administrator of FSA may waive the AGI limit
for conservation and related program benefits on a case-by-case basis
for the protection of environmentally sensitive land or other land of
special significance. Similarly, with respect to programs administered
by the Natural Resources Conservation Service (NRCS), this rule
provides that the Chief of NRCS may issue such a waiver. Specific
criteria that must be met for the consideration of the wavier are
outlined in this rule.
The AGI limits implemented by this rule replace the prior limit of
$2.5 million and the previous exception for those earning 75 percent of
their income from farming.
This rule amends Sec. 1400.3, ``Definitions,'' to add definitions
for ``Average Adjusted Gross Income,'' ``Average Adjusted Gross Farm
Income,'' and ``Average Adjusted Gross Nonfarm Income.'' It also amends
subpart F (prior to this rule, subpart G), ``Average Adjusted Gross
Income Limitation,'' to implement these AGI limits that are required by
the 2008 Farm Bill.
The 2008 Farm Bill AGI requirements for payment eligibility apply
to payments from commodity programs
[[Page 79268]]
and from all conservation programs that are specified by Title II of
the 2008 Farm Bill and Title XII of the Food Security Act of 1985 (Pub.
L. 99-198, commonly known as the 1985 Farm Bill). AGI will be
calculated based on the average income for the 3 taxable years
preceding the most immediately preceding complete taxable year for
which benefits are requested. The 3 year average method of determining
AGI is unchanged, except that the relevant 3 year period is now the 3
taxable years preceding the most immediately preceding complete taxable
year for which benefits are requested, while previously the method used
the 3 years prior to the year for which program benefits are requested.
The definition of AGI will be based on the Internal Revenue Service
definition, which is unchanged.
The definition of income derived from farming, ranching, and
forestry operations in Sec. 1400.501, ``Determination of Average
Adjusted Gross Income,'' is expanded by this rule to include income
from the processing, storing, and transporting of farm, ranch, and
forestry commodities; production of farm-based renewable energy; and,
in some instances, the provision of production inputs and services to
farmers, ranchers, and foresters. These activities were included in the
provisions for determining farm income in section 1604 of the 2008 Farm
Bill.
Payment Limits for Specific Programs
Subpart A, ``General Provisions,'' Sec. 1400.1, ``Applicability,''
sets payment limits for specific programs. The 2008 Farm Bill provides
that the payment limit is $40,000 for the Direct and Counter-cyclical
Program (DCP) direct payments and $65,000 for DCP counter-cyclical
payments. That is unchanged from the previous limit. The limit of
$50,000 for CRP payments is unchanged. The limit of $100,000 for
Noninsured Crop Disaster Assistance Program (NAP) payments is
unchanged. The limit on Environmental Quality Incentives Program (EQIP)
payments is reduced from $450,000 to $300,000 for the term of the
program.
This rule adds a limit of $100,000 for Supplemental Revenue
Assistance Program (SURE) payments and for Tree Assistance Program
(TAP) payments. Total payments from SURE, the Livestock Indemnity
Program (LIP), the Livestock Forage Disaster Program (LFP), and the
Emergency Assistance Program for Livestock, Honey Bees, and Farm-raised
Fish (ELAP) may not exceed $100,000.
This rule removes the limit of $75,000 specifically for the
Marketing Assistance Loans (MAL) program gains and Loan Deficiency
Payments (LDP) program; there are no longer any limits on payments for
MAL and LDP.
As specified in the 2008 Farm Bill, if a person or legal entity is
participating in ACRE, the direct payments will be reduced by 20
percent on each farm participating in ACRE. The total limit for
counter-cyclical payments and ACRE payments as specified in this rule
is $65,000 plus the amount the direct payments were reduced. The 2008
Farm Bill specifies the same limits for peanuts. All the program-
specific payment limits are specified in Sec. 1400.1,
``Applicability.''
Payment Limitation--Eligible Persons and Entities
The regulations governing persons and legal entities eligible for
payments are in part 1400, subpart B. This rule changes the title of
subpart B, ``Person Determinations,'' to ``Payment Limitation'' and
makes other changes to the subpart required by the 2008 Farm Bill.
This rule amends the definition of ``person'' and adds a definition
of ``legal entity'' in Sec. 1400.3, ``Definitions.'' The 2008 Farm
Bill defines ``person'' as a natural person. The definition of person
in this rule no longer includes a legal entity or government agency.
This rule removes the sections in subpart B describing various
kinds of legal entities that are no longer relevant for the purpose of
determining payment limits.
This rule changes the provisions for spouses in regard to separate
or combined status for payment limitation purposes. Spouses may still
each qualify for a separate payment limitation, but the provisions
where husband and wife are considered combined for the purposes of this
part are removed. While each spouse may now have their own respective
limitation, each must also meet applicable program and payment
eligibility requirements to receive program benefits. The rule includes
a new provision by which if one spouse is determined to be actively
engaged in farming, the other spouse is credited for the purposes of
payment eligibility with making significant contributions of active
personal labor or active personal management to the farming operation.
This is not to be construed as meaning if one spouse qualifies for
payment, the other automatically qualifies as well. As previously
mentioned, both spouses must make significant and requisite
contributions to the farming operation that are commensurate with their
claimed shares to be considered actively engaged in farming and
eligible for program benefits.
This rule removes both the 3-entity rule for payment limitation
purposes and the definition of substantial beneficial interest. A
person may now receive program benefits through an unlimited number of
entities. The process of determining payment limits for entities no
longer requires a designation of substantial beneficial interest. Since
substantial beneficial interest only applied to the designation of
entities for payment under the 3-entity rule, that term is not
necessary and has been removed.
Payment limitation will be determined by direct attribution, taking
into account the direct and indirect ownership interests of a person or
legal entity that is eligible to receive such payment. The new
attribution of payments provisions are in a new Sec. 1400.105,
``Attribution of Payments,'' and a new definition of attribution is
added to Sec. 1400.3, ``Definitions.'' Attribution will be tracked
through four levels of ownership in legal entities. For the purposes of
determining whether a person or legal entity has met the new payment
limits, every payment made directly to a person or legal entity will be
combined with their pro rata interest in payments received by a legal
entity in which the person or legal entity has a direct or indirect
ownership interest. Payments made to a legal entity will be attributed
directly to persons and limited to the amounts specified in subpart A.
This rule adds a new Sec. 1400.107, ``Notification of Interests,''
which requires each person or legal entity receiving payments to
provide the name and taxpayer ID number of each legal entity in which
the person or legal entity holds an ownership interest. While this is
designated as a new section, this requirement was in effect previous to
the 2008 Farm Bill, as part of the eligibility requirements for the
now-obsolete 3-entity rule.
Payments made to a joint venture or general partnership will not
exceed the payment limit multiplied by the number of persons or legal
entities (other than joint ventures and general partnerships) that
comprise the direct ownership of the joint venture or general
partnership.
Payments issued to a minor child will be attributed to the child's
parent who receives the larger amount in program payments compared to
the other parent, both directly and indirectly, unless certain
conditions are otherwise met.
For the purposes of attribution in Sec. 1400.105, ``Attribution of
Payments,'' the payment limitations specified will not apply to
marketing cooperatives but
[[Page 79269]]
will now apply to the producers or members of those cooperatives as
persons.
The 2008 Farm Bill provides that Federal agencies are not eligible
for program benefits. Similarly, State and local governments and
political subdivisions, and agencies thereof, will no longer be
eligible, with an exception for payments earned on State-owned land
that is used for the support of public schools. Payments received under
this public school support exception are limited to $500,000 annually,
unless the State has a population of less than 1.5 million.
This rule amends Sec. 1400.3 by removing the definition of
``Tribal venture.'' This rule also amends Sec. 1400.4 by removing all
references to Indian tribal ventures, including the restrictions on
payments to such ventures. In this rule, Sec. 1400.4 exempts Indian
tribes, as defined in 1400.3, from all requirements of this part.
Provisions of this part apply to persons or legal entities. Indian
tribes are not included under the definition of person or legal entity
as provided by the 2008 Farm Bill for the application of the payment
eligibility and payment limitation provisions. The 2008 Farm Bill does
not impose any limitations or restrictions on program payments and
benefits to Federally recognized Indian tribes. This exemption to the
provisions of this part only applies to Indian tribes. The payment
eligibility and payment limitation requirements remain applicable to
individual American Indians or Alaska Natives receiving program payment
and benefits as individuals, or through a group in which all members of
the group are American Indians or Alaska Natives.
This rule provides more restrictive payment eligibility
requirements than the prior requirements for new persons and legal
entities that are added to an existing farming operation. These
requirements, referred to as the ``substantive change'' rule, are found
in Sec. 1400.104 (previously Sec. 1400.109), ``Changes in Farming
Operations.'' These discretionary changes require that any transfer of
land or equipment by sale or gifting between existing members and new
members must be based on fair market value of the land or equipment,
the sale cannot be owner financed, and the former owner of the land or
equipment cannot retain any residual control or preferential buyback
rights to the land or equipment. This is to ensure that this change or
transfer actually occurs other than just on paper. Otherwise, the
person or legal entity being added to the farming operation could be
obtaining program payments in the absence of making the requisite and
significant contributions to the farming operation for eligibility.
Furthermore, the farming operation would be gaining another limitation
even though no real, meaningful change occurred in the farming
operation to justify the additional limitation.
Requirements in the substantive change rule for an addition of
persons or legal entities to an existing farming operation can also be
met through an addition of land to the existing farming operation.
Previously, an increase of cropland operated by the farming operation
of at least 20 percent and with a planting history comparable to the
area was required. Now the requirement is the addition of base acres in
an amount that represents at least a 20 percent increase from the
previous year. This 20 percent increase in base acres will now qualify
one additional person or legal entity for payment limitation purposes,
rather than an unlimited number of additional persons or legal
entities. However, additional persons or legal entities beyond one for
payment limitation purposes may be recognized if an FSA State Office
specialist determines that the increase in base acres was of a
magnitude that would support further additions to the farming operation
of persons or legal entities for payment limitation purposes.
These revisions to the substantive change rule are being announced
prior to the beginning of a crop or program year to afford adequate
time for any existing farming operation and its members that are
contemplating such operational changes for the coming year to be fully
informed of these revisions.
An example of whether a change in farming operations will be
considered a ``substantive change'' by this rule would be that Father A
has previously conducted an individual farming operation consisting of
all owned land. In 2009, Father A expands the operation by forming a
three-member general partnership with his now adult children B and C,
and with each member having equal shares. No additional acreage is
farmed, but Father A has gifted to each child one-third of the owned
land. The gifted land is commensurate with individuals' share of the
farming operation. Previously, this would be considered a bona fide and
substantive change in the farming operation. Through the landowner
provision, each person would be considered actively engaged in farming
and each would have their own respective payment limitation.
With this interim rule, this would still be considered a
substantive change in the farming operation, but proof of the gifting
of this land to the children must be provided. The land transfers would
most likely be recorded at the Register of Deeds, new deeds would be
issued to reflect the current owners of the land, and all parties would
have been expected to report the gifts to the Internal Revenue Service
(IRS) for tax purposes. Documentation as described would lend support
that the substantive change requirements were met.
Another example would be an existing three-member general
partnership comprised of a Father B and children D and E. The decision
was made to expand the farming operation for 2009 for the inclusion of
two newly formed limited liability companies, F and G, each of which
are comprised of the individuals, B, D and E. The decision to expand
the operation was based on the rental of the neighbor's farm. The
increase in base acres held by the general partnership in 2008 and the
amount that would be controlled in 2009 was over 50 percent.
Previously, this would be considered a bona fide and substantive
change in the farming operation as the addition was of cropland of at
least 20 percent. Both of the legal entities would have been recognized
in the farming operation for payment limitation purposes. Under the
revised regulation, a substantive change will be considered to have
occurred in the farming operation with the increase in base acres of at
least 20 percent. Under the revised regulation, the bona fide and
substantive change which occurred in the farming operation with the
increase in base acres of more than 20 percent would initially qualify
only one of the legal entities for payment limitation purposes.
However, in this example, the increase in base acres was twice the
minimum amount required. The partnership would therefore be afforded
the opportunity to submit a written request for the increase in one
additional person or legal entity to the farming operation. The request
would be forwarded to the reviewing authority in the State FSA office
designated to consider such cases. Upon review of the supporting
documentation provided with the request, a determination would be made
and issued accordingly.
The entire subpart D that provided the specifics of the 3-entity
rule is removed, and subsequent subparts redesignated. The 2008 Farm
Bill eliminated the 3-entity rule. The removal of this subpart means
that persons can receive payments based on ownership in an unlimited
number of entities, until the payment limits in subpart A are reached.
All payments will be traced
[[Page 79270]]
through four levels of ownership for direct attribution to persons.
Clarifications Made To Provide Clarity and Enforceability
This interim rule also implements revisions to the existing
requirements for payment eligibility and payment limitation. These
changes are made to strengthen or clarify existing regulatory
provisions while remaining consistent with statutory provisions, to
provide consistency in determinations, and to simplify the
administration of the payment eligibility and payment limitation
provisions.
This rule amends Sec. 1400.2, ``Administration,'' to clarify that
eligibility determinations will be made within 60 days after the
supporting documentation is received in the county office.
This rule amends Sec. 1400.502 (redesignated, previously Sec.
1400.602), ``Compliance and Enforcement,'' to require that persons and
legal entities provide detailed supporting documentation on AGI each
year to CCC. Previously, the regulation required this compliance
information only when specifically required by CCC. Similarly, this
rule amends that same section to specify that audits will be conducted
to determine compliance, while previously the regulation specified only
that audits may be conducted.
This rule amends Sec. 1400.6, ``Joint and Several Liability''
(redesignated, previously Sec. 1400.7), to clarify possible conditions
for release from liability. The provisions of the 2008 Farm Bill now
extend the reach of liability for the recovery of payments to any party
determined to have participated in a scheme or device or other equally
serious actions for the purpose of evading the provisions of this part.
In the event a person cooperates with the enforcement of these
provisions, the Executive Vice President of CCC has the authority to
partially or fully release that person from liability.
Payment Eligibility--Actively Engaged in Farming
This rule changes the title of subpart C from ``Actively Engaged in
Farming Determinations'' to ``Payment Eligibility.'' The general
structure and content of this subpart remain unchanged. The 2008 Farm
Bill requires that, in order to be eligible for payment, a person or
legal entity be actively engaged in farming, and further defines
``actively engaged'' as consisting of a substantial contribution of
capital, equipment, or land and personal labor or active personal
management. This interim rule clarifies the ``actively engaged''
eligibility requirements to be consistent with the 2008 Farm Bill,
including making discretionary changes as to what constitutes a
substantial contribution and who must make such a contribution. This
rule provides that a contribution of active personal labor, active
personal management, or a combination thereof, must be provided by each
member or shareholder that has an ownership interest in an entity that
requests program benefits and collectively, such contributions must be
significant and commensurate. Furthermore, the contribution of active
personal labor or active personal management of each member of
shareholder must be made to the farming operation on a regular basis
and must be identifiable and documentable as a separate and distinct
contribution from that of any other member or shareholder in the
farming operation. The 2008 Farm Bill requires a significant
contribution of active personal labor or active personal management to
a farming operation to qualify a person or legal entity for payment.
Previously, significant contributions could be made by members or
stockholders that comprised only 50 percent ownership interest in the
entity being qualified in order to qualify all the members or
stockholders. Previously, the active personal labor or management
contribution for the legal entity could be made by some of the
stockholders or members, while the remaining stockholders and members
could make no requisite and at-risk contributions to the farming
operation and still realize benefits indirectly through the legal
entity.
An example to illustrate the changes in this interim rule
concerning what constitutes actively engaged in farming is provided
below:
Corporation A is held equally by stockholders B, C, D and E.
Corporation A provides all of the capital, leases all of the equipment,
cash rents all of the land, and hires all of the labor necessary to
farm this land. The stockholders represent that they equally provide
all of the active personal management necessary to successfully conduct
this farming operation. Regular management meetings are held, either in
person or by conference call, in which the stockholders jointly make
all decisions concerning all financing, purchasing, planting,
harvesting, marketing and the supervision of all hired labor in the
farming operation.
Previously, the corporation just described would be considered
actively engaged in farming by the entity's contributions of capital,
land and equipment, and the collective contribution of active personal
management of all stockholders. The stockholders that made
contributions to qualify the entity held more than 50 percent ownership
interest in the entity that requested program benefits.
With this rule, each of the stockholders in this example would be
required to establish that their respective contribution of active
personal management was made on a regular basis, and was identifiable
and documentable as separate and distinct from the other stockholders
of the entity. For example, stockholder B could represent through
copies of signed purchase orders that stockholder B was individually
responsible for obtaining and purchasing all inputs for the farming
operation on behalf of the Corporation. Stockholder C could represent
through signed contracts and delivery agreements with grain elevators
and a cotton gin that stockholder C was individually responsible for
the marketing of all commodities produced by the Corporation's farming
operation. Stockholder D could represent through copies of payroll
records that stockholder D was individually responsible for the
supervision of all hired labor utilized by the Corporation's farming
operation. However, if Stockholder E made no claim of management that
is separate and distinct from the other stockholders, then as the
result of Stockholder E's failure to meet the requirements of this
interim rule, the payments issued to the payment entity, that being
Corporation A, would be reduced by the interest held by Stockholder E.
Reduction or Denial of Program Payments and Benefits
The provisions for the denial of program payments and benefits are
expanded under the 2008 Farm Bill. Payments and benefits will be denied
for at least two years if a person or legal entity is determined to
have adopted a scheme or device to circumvent the payment eligibility
and payment limitation requirements. This interim rule now provides
additional guidance in Sec. 1400.5, ``Denial of Program Benefits''
(renamed, previously titled ``Scheme or Device''), on what actions are
considered to be a scheme or device and what the indicators may be that
a scheme is being perpetrated. Under the 2008 Farm Bill, if fraud or
other equally serious actions are determined to exist, all parties
involved may be ineligible for all payments and benefits under the
programs subject to the provisions of this part for up to 5 years.
The application of the AGI limitation requires a reduction in any
payments or
[[Page 79271]]
benefits issued to a joint venture, general partnership or legal entity
in an amount commensurate with the direct and indirect ownership
interest of any person or legal entity that fails to comply with the
respective adjusted gross income limitation eligibility standard for
the direct receipt of such payments or benefits. Previously, ownership
interest was tracked and reviewed to the sixth level to determine
whether a commensurate reduction was applicable and the extent of such
reduction. Now with the implementation of direct attribution for
payment limitation in which ownership in legal entities is tracked
through four levels, the ownership interest in legal entities for the
application of the AGI limitations will also be tracked through the
same number of levels.
Miscellaneous Minor Changes and Housekeeping
Subparts D, ``Cash Rent Tenants,'' and E, ``Foreign Persons''
(redesignated, previously subparts E and F), are largely unchanged,
except for the references to natural persons and legal entities
discussed above and that were made throughout the part. This rule makes
minor amendments to subpart D, ``Cash Rent Tenants,'' to clarify that
if a cash rent tenant is a joint operation, each member must make a
significant contribution of active personal labor or management to be
eligible for payments. This amendment is needed to be consistent with
other changes in this part regarding payment eligibility and with the
2008 Farm Bill.
This rule reorganizes part 1400, including changing the order of
some sections, renumbering sections, and renaming some sections and
subparts. These housekeeping changes are intended to improve
readability and do not make substantive changes to the regulations.
Subpart B, ``Person Determinations,'' is renamed ``Payment
Limitation.'' Subpart C, ``Actively Engaged in Farming
Determinations,'' is renamed ``Payment Eligibility.'' Subpart D,
``Permitted Entities,'' is removed; subsequent subparts are renumbered.
Throughout the part, references to ``individual(s) and entities'' are
changed to ``person(s) and legal entities,'' consistent with the 2008
Farm Bill requirement to attribute payments to natural persons.
Similarly, references to 2003 through 2007 crop years are changed to
refer to the 2009 through 2012 crop years.
Summary of Amendments to 7 CFR Part 1400 Made by This Rule
------------------------------------------------------------------------
Previous regulation Revised regulation
------------------------------------------------------------------------
Title of part 1400. Payment Title amended to specify ``for 2009 and
Limitation and Payment Subsequent Crop, Program or Fiscal
Eligibility. years.''
Subpart A--General provisions Revised references to the programs for
Sec. 1400.1 Applicability.. which this regulation now applies
including ACRE, NAP, ELAP, LFP, LIP,
TAP, and applicable NRCS conservation
programs, and added the respective
payment limitations. Applicable NRCS
conservation programs include:
Agricultural Management
Assistance (AMA),
Agricultural Water
Enhancement Program (AWEP),
Chesapeake Bay Watershed
Program (CBWP),
Conservation Stewardship
Program (CSTP),
Cooperative Conservation
Partnership Initiative (CCPI),
Environmental Quality
Incentives Program (EQIP),
Farm and Ranchland Protection
Program (FRPP),
Grasslands Reserve Program
(GRP),
Wetlands Reserve Program
(WRP), and
Wildlife Habitat Incentive
Program (WHIP).
Removed the programs for which this
regulation no longer applies.
Sec. 1400.2 Administration. Provided a reference point for the start
of the 60-day period for CCC to make
determinations.
Clarified that the 60-day time period
specified does not apply to the
completion of end of year reviews for
compliance.
Sec. 1400.3 Definitions.... New definitions for attribution, average
adjusted gross income, average adjusted
gross farm income, average adjusted
gross nonfarm income, contribution, and
legal entity.
Revised definitions for person, joint
operation, active personal labor, and
active personal management.
Removed definitions of entity, Indian
tribal ventures, permitted entity, and
substantial beneficial interest.
Sec. 1400.4 Indian Tribal Title changed to Indian Tribes.
Ventures.
Added that Indian tribes, as defined, are
exempt from all provisions of this part.
Sec. 1400.5 Scheme or Title changed to Denial of program
Device. benefits:
Added (1) Indicators of actions that may
be considered a scheme or device;
(2) The period of ineligibility if fraud
is determined;
(3) Producer ineligibility extends to
cash rent tenants; and
(4) Denial of benefits to all parties on
a pro rata basis according to ownership
interest.
Sec. 1400.6 Joint and Added (1) The basis and extent of
Several Liability. ineligibility and payment recovery and
(2) Possible conditions for partial or
full release from liability.
Removed reference to individuals and
entities considered one ``person.''
Sec. 1400.7 Commensurate Title changed to Commensurate
Contributions. Contributions and Risk.
Revised reference from individuals and
entities to persons and legal entities.
Added that risk must be commensurate with
the claimed share of the farming
operation.
Sec. 1400.9 Appeals........ Revised reference from individuals and
entities to persons and legal entities.
1400 Subpart B Person Renamed to Payment Limitation.
Determinations. Removed all references to ``person''
Sec. 1400.100 through determinations and the timing of making
1400.107. such ``person'' determinations.
Replaced with (1) Provisions for the
control and limitation of payments to
persons and legal entities by direct
attribution;
(2) Limitations and other restrictions
for payments to States, political
subdivisions and agencies thereof;
(3) New provisions applicable only to
spouses;
[[Page 79272]]
(4) Additional requirements for the
increase in persons to a farming
operation that are eligible for payment;
and
(5) Required information from all persons
and legal entities that request program
payments.
Removed sections 1400.108 and 109.
1400 Subpart C Actively Renamed to Payment Eligibility.
Engaged in Farming Revised all references of individual and
Determinations. entity to person and legal entity.
Sec. 1400.201 through
1400.213.
For uniformity, moved requirements of the
definitions of ``separate and distinct
interest'' and significant contribution
from Sec. 1400.3, ``Definitions,'' to
the applicable sections of the subpart.
Included additional requirements for the
contributions of active personal labor
or management by each of the
stockholders or members of a legal
entity in order for the legal entity to
be considered actively engaged in
farming.
1400 Subpart D Permitted Renamed Subpart D Cash Rent Tenants.
Entities. Removed all reference to permitted
Sec. 1400.301.............. entities and the requirements of
designation thereof for payment.
Clarified the cash rent tenant
requirements for joint operations and
entities.
Revised all references of individuals and
entities to persons and legal entities.
Redesignated from Sec. 1400.401.
1400 Subpart E Cash Rent Redesignated Subpart E to Subpart D.
Tenants. Redesignated Sec. 1400.401 to 1400.301.
Sec. 1400.401..............
1400 Subpart F Foreign Redesignated Subpart F to Subpart E.
Persons. Redesignated Sec. Sec. 1400.501
Sec. Sec. 1400.501 through through 1400.502 to Sec. Sec.
1400.502. 1400.401 through 1400.402.
Revised all references of individuals and
entities to persons and legal entities;
included revised standards for active
personal labor in the definition of
substantial contribution of active
personal labor.
1400 Subpart G Average Redesignated Subpart G to Subpart F.
Adjusted Gross Income. Redesignated Sec. Sec. 1400.600
Sec. 1400.600 through through 1400.603 to Sec. Sec.
1400.603. 1400.500 through 1400.503.
Revised (1) All references of individuals
and entities to persons and legal
entities;
(2) All references of 2003 through 2007
years of applicability to 2009 through
2012;
(3) All references of the $2.5 million
limitation to the three limitations--2
for commodity programs and one for
conservation programs; and
(4) The reference and application of the
test for farm income from 75 percent to
not less than 66.66 percent.
Included the revisions (1) The definition
and sources of income from farming,
ranching, forestry and related
activities and
(2) Ownership interest in entities will
be tracked through only four levels,
rather than six, for consistency with
the same number of levels as for direct
attribution of payments.
------------------------------------------------------------------------
Notice and Comment
Section 1601 of the 2008 Farm Bill requires that these amendments
be issued through an interim rule for the 2009 and subsequent crop,
fiscal, or program years. This rule is effective on publication, but
subject to modification after the consideration of comments. CCC will
consider comments received during the comment period for this interim
rule, which ends January 28, 2009. After the comment period closes, CCC
will publish another document in the Federal Register. The document
will include a discussion of any comments received during the comment
period and any amendments made to the rule as a result of the comments.
Executive Order 12866
The Office of Management and Budget (OMB) designated this interim
rule as significant under Executive Order 12866. A cost-benefit
assessment is summarized below and is available from the contact listed
above.
Summary of Economic Impacts
The 2008 Farm Bill makes significant changes in how USDA will
administer payment limits and determine who is eligible for payments.
Those changes will be implemented beginning with the 2009 crop, fiscal,
or program year, as applicable. The most fundamental change in how
payment limits are to be administered is that each member or owner of
farming entities will be assigned a limit. The payment limits that
applied to the entities themselves under the 2002 Farm Bill are
retained. The motivation for this change is twofold:
(1) Increase transparency by allocating payments made to farming
entities to their members.
(2) Moderate payments by adding another layer of payment limits.
For example, the 2008 Farm Bill maintains payment limits on the
corporations themselves and adds additional limits on the owners of
farming corporations.
USDA will be required to track payments made to entities, such as
farming corporations, to the owners of those entities. Such tracking is
called direct attribution. Both entities and their owners will now have
payment limits. Direct attribution will involve extensive USDA staff
resources, and consequently cost, in the implementation phase and has
the potential for some reduction in Government outlays. Reductions in
outlays will diminish as farmers reorganize their operations in order
to capture the highest possible payments. Due to uncertainty about the
costs it is difficult to estimate annual impacts.
Other changes made in this interim rule are expected to result in
little changes to Government outlays.
Regulatory Flexibility Act
This rule is not subject to the Regulatory Flexibility Act since
CCC is not required to publish a notice of proposed rulemaking for this
rule. CCC is authorized by section 1601 of the 2008 Farm Bill to issue
an interim rule effective on publication with an opportunity for
comment.
[[Page 79273]]
Environmental Assessment
The environmental impacts of this final rule have been considered
in a manner consistent with the provisions of the National
Environmental Policy Act (NEPA), 42 U.S.C. 4321-4347, the regulations
of the Council on Environmental Quality (40 CFR Parts 1500-1508), and
FSA's regulations for compliance with NEPA (7 CFR part 799). The
changes to Payment Limitation and Payment Eligibility, required by the
2008 Farm Bill that are identified in this rule, are non-discretionary.
Therefore, FSA has determined that NEPA does not apply to this rule and
no environmental assessment or environmental impact statement will be
prepared.
Executive Order 12372
This program is not subject to Executive Order 12372, which
requires consultation with State and local officials. See the notice
related to 7 CFR part 3015, subpart V, published in the Federal
Register on June 24, 1983 (48 FR 29115).
Executive Order 12988
The interim rule has been reviewed in accordance with Executive
Order 12988. This rule is not retroactive and does not preempt State or
local laws, regulations, or policies unless they present an
irreconcilable conflict with this rule. Before any judicial action may
be brought concerning the provisions of this rule the administrative
appeal provisions of 7 CFR parts 11 and 780 must be exhausted.
Executive Order 13132
The policies contained in this rule do not have any substantial
direct effect on States, on the relationship between the national
government and the States, or on the distribution of power and
responsibilities among the various levels of government. Nor does this
rule impose substantial direct compliance costs on State and local
governments. Therefore, consultation with the States is not required.
Executive Order 13175
The policies contained in this rule do not impose substantial
unreimbursed direct compliance costs on Indian tribal governments or
have tribal implications that preempt tribal law.
Unfunded Mandates
This rule contains no Federal mandates under the regulatory
provisions of Title II of the Unfunded Mandates Reform Act of 1995
(UMRA) for State, local or tribal governments, or the private sector.
In addition, CCC is not required to publish a notice of proposed
rulemaking for this rule. Therefore, this rule is not subject to the
requirements of sections 202 and 205 of UMRA.
Federal Assistance Programs
The title and number of the Federal assistance programs in the
Catalog of Federal Domestic Assistance to which this interim rule
applies are:
10.055--Direct and Counter-Cyclical Payments Program.
10.069--Conservation Reserve Program.
10.072--Wetlands Reserve Program.
10.082--Tree Assistance Program.
10.912--Environmental Quality Incentives Program.
10.914--Wildlife Habitat Incentive Program.
10.917--Agricultural Management Assistance.
10.918--Ground and Surface Water Conservation--Environmental Quality
Incentives Program.
10.920--Grassland Reserve Program.
This interim rule also applies to the following Federal assistance
programs that are not in the Catalog of Federal Domestic Assistance:
ACRE,
ELAP,
LFP,
LIP,
SURE,
AWEP,
CBWP,
CSTP,
CCPI, and
FRPP.
Paperwork Reduction Act
The regulations in this rule are exempt from the requirements of
the Paperwork Reduction Act (44 U.S.C. Chapter 35), as specified in
section 1601(c)(2) of the 2008 Farm Bill, which provides that these
regulations be promulgated and the programs administered without regard
to the Paperwork Reduction Act.
E-Government Act Compliance
CCC is committed to complying with the E-Government Act, to promote
the use of the Internet and other information technologies to provide
increased opportunities for citizen access to Government information
and services, and for other purposes.
List of Subjects in CFR Part 1400
Agriculture, Loan programs--agriculture, Conservation, Price
support programs.
0
For the reasons discussed above, this rule revises 7 CFR part 1400 to
read as follows:
PART 1400--PAYMENT LIMITATION AND PAYMENT ELIGIBILITY FOR 2009 AND
SUBSEQUENT CROP, PROGRAM, OR FISCAL YEARS
Subpart A--General Provisions
Sec.
1400.1 Applicability.
1400.2 Administration.
1400.3 Definitions.
1400.4 Indian Tribe.
1400.5 Denial of program benefits.
1400.6 Joint and several liability.
1400.7 Commensurate contributions and risk.
1400.8 Equitable treatment.
1400.9 Appeals.
Subpart B--Payment Limitation
1400.100 Revocable trust.
1400.101 Minor children.
1400.102 States, political subdivisions, agencies thereof.
1400.103 Charitable organizations.
1400.104 Changes in farming operations.
1400.105 Attribution of payments.
1400.106 Payment limits.
1400.107 Notification of interests.
Subpart C--Payment Eligibility
1400.201 General provisions for determining whether a person or
legal entity is actively engaged in farming.
1400.202 Persons.
1400.203 Joint operations.
1400.204 Limited partnerships, limited liability partnerships,
limited liability companies, corporations and other similar legal
entities.
1400.205 Trusts.
1400.206 Estates.
1400.207 Landowners.
1400.208 Family members.
1400.209 Sharecroppers.
1400.210 Deceased and incapacitated persons.
1400.211 Persons and legal entities not considered to be actively
engaged in farming.
1400.212 Growers of hybrid seed.
1400.213 Military personnel.
Subpart D--Cash Rent Tenants
1400.301 Eligibility.
Subpart E--Foreign Persons
1400.401 Eligibility.
1400.402 Notification.
Subpart F--Average Adjusted Gross Income Limitation
1400.500 Applicability.
1400.501 Determination of average adjusted gross income.
1400.502 Compliance and enforcement.
1400.503 Commensurate reduction.
Authority: 7 U.S.C. 1308, 1308-1, 1308-2, 1308-3, 1308-3a, 1308-
4, and 1308-5.
Subpart A--General Provisions
Sec. 1400.1 Applicability.
(a) This part, except as otherwise noted, is applicable to all of
the following programs and any other
[[Page 79274]]
programs as provided in individual program regulations in this chapter
(including, but not limited to, all price support programs in parts
1421 and 1434 of this chapter):
(1) The Direct and Counter-cyclical Program (DCP), including the
Average Crop Revenue Election (ACRE), part 1412 of this chapter;
(2) The Conservation Reserve Program (CRP), part 1410 of this
chapter;
(3) The Noninsured Crop Disaster Assistance Program (NAP), part
1437 of this chapter;
(4) The Supplemental Revenue Assistance Program (SURE), part 1480
of this chapter;
(5) The Livestock Forage Disaster Program (LFP), Livestock
Indemnity Program (LIP), and the Emergency Assistance Program for
Livestock, Honey Bees and Farm-raised Fish (ELAP), part 1439 of this
chapter;
(6) The Tree Assistance Program (TAP), part 783 of this title; and
(7) The Natural Resource Conservation Service (NRCS) conservation
programs of this title including Agricultural Management Assistance
(AMA), Agricultural Water Enhancement Program (AWEP), Chesapeake Bay
Watershed Program (CBWP), Conservation Stewardship Program (CSTP),
Cooperative Conservation Partnership Initiative (CCPI), Environmental
Quality Incentives Program (EQIP), Farm and Ranchland Protection
Program (FRPP), Grasslands Reserve Program (GRP), Wetlands Reserve
Program (WRP), and Wildlife Habitat Incentive Program (WHIP).
(b) This part will apply to the programs specified in:
(1) Paragraphs (a)(1), (3), (4), and (6) of this section on a crop
year basis;
(2) To the program in paragraph (a)(2) of this section on a fiscal
year basis;
(3) To the programs in paragraph (a)(5) of this section on a
calendar year basis; and
(4) To the programs in paragraph (a)(7) of this section based on
available funding.
(c) This part will be used to determine the manner in which
payments will be attributed to persons and legal entities for the
payment limitations provided in this section and to other programs as
provided in individual program regulations in this chapter.
(d) Where more than one provision of this part may apply, the
provision which is most restrictive on the program participant will be
applied.
(e) The payment limitations of this part are not applicable to:
(1) Payments made under State conservation reserve enhancement
program agreements approved by the Secretary and
(2) Payments made subject to this part if ownership interest in
land or a commodity is transferred as the result of the death of a
program participant and the new owner of the land or commodity has
succeeded to the contract of the prior owner. If the successor is
otherwise eligible, payments cannot exceed the amount the previous
owner was entitled to receive at the time of death.
(f) The following amounts are the limitations on payments per
person or legal entity for the applicable period for each payment or
benefit.
------------------------------------------------------------------------
Limitation per person
or legal entity, per
Payment or benefit crop, program, or
fiscal year
------------------------------------------------------------------------
(1) Direct Payments for covered commodities \1\ $40,000
(2) Direct Payments for peanuts \1\............ 40,000
(3) CRP annual rental payments \2\............. 50,000
(4) GRP........................................ 50,000
(5) WHIP....................................... 50,000
(6) WRP........................................ 50,000
(7) Counter-Cyclical Payments for covered 65,000
commodities \3\...............................
(8) Counter-Cyclical Payments for peanuts \3\.. 65,000
(9) NAP payments............................... 100,000
(10) Supplemental Agricultural Disaster 100,000
Assistance \4\................................
(11) TAP....................................... 100,000
(12) CSTP \5\.................................. 200,000
(13) EQIP...................................... 300,000
------------------------------------------------------------------------
\1\ If the person or legal entity has a direct or indirect interest in
payments earned on a farm that is in ACRE, this limitation will
reflect a 20 percent reduction in direct payments on each farm that is
participating in ACRE.
\2\ Limitation applicable only to CRP contracts approved prior to
October 1, 2008.
\3\ Under ACRE, this amount will be a combined limitation for counter-
cyclical and ACRE payments. If a person or legal entity has a direct
or indirect interest in payments earned on a farm that is
participating in ACRE, this limitation will reflect an increase for
the amount that the direct payments were reduced.
\4\ Total payments received under Supplemental Agricultural Disaster
Assistance through SURE, LIP, LFP, and ELAP may not exceed $100,000.
\5\ The $200,000 limit is the total limit for 2009 through 2012. Note:
AMA, AWEP, CBWP, CCPI, and FRPP are all limited by available funding
rather then an amount by participant.
(g) With respect to contracts for conservation programs approved
prior to October 1, 2008, the payment limitation rules in 7 CFR part
1400 in effect on September 30, 2008 will be applicable (see 7 CFR part
1400, revised as of January 1, 2008).
Sec. 1400.2 Administration.
(a) The regulations in this part will be administered under the
general supervision and direction of the Executive Vice President,
Commodity Credit Corporation (CCC), and the Administrator, Farm Service
Agency (FSA). In the field, the regulations in this part will be
administered by the FSA State and county committees (referred to as
``State committee'' and ``county committee,'' respectively).
(b) State executive directors, county executive directors, and
State and county committees do not have authority to modify or waive
any of the provisions of this part.
(c) The State committee may take any action authorized or required
by this part to be taken by the county committee that has not been
taken by such committee. The State committee may also:
(1) Correct or require a county committee to correct any action
taken by such county committee that is not in accordance with this part
or
(2) Require a county committee to withhold taking any action that
is not in accordance with this part.
[[Page 79275]]
(d) No delegation in this part to a State or county committee
precludes the Executive Vice President, CCC, and the Administrator,
FSA, or a designee, from determining any question arising under this
part or from reversing or modifying any determination made by a State
or county committee.
(e) Benefits from programs subject to this part may not be issued
until all required forms and necessary payment eligibility and payment
limitation determinations are made.
(f) The initial payment eligibility determinations will be made
within 60 days after the required forms and any other supporting
documentation needed in making such determinations are received in the
county FSA office. If the determination is not made within 60 days, the
producer will receive a determination for that program year that
reflects the determination sought by the producer unless the Deputy
Administrator determines that the producer did not follow the farm
operating plan that was presented to the county or State committee for
such year.
(g) Initial determinations concerning the provisions of this part
will not be made by a county FSA office with respect to any farm
operating plan that is for a joint operation with six or more members.
(h) Reviews of farming operations and corresponding documentation
submitted by program participants may be conducted at any time to
determine compliance with applicable statutes and regulations. The
completion of such reviews is not subject to the time constraints
specified in paragraph (f) of this section.
Sec. 1400.3 Definitions.
(a) The terms defined in part 718 of this title are applicable to
this part and all documents issued in accordance with this part, except
as otherwise provided in this section.
(b) The following definitions are also applicable to this part:
Active personal labor means personally providing physical
activities necessary in a farming operation, including activities
involved in land preparation, planting, cultivating, harvesting, and
marketing of agricultural commodities in the farming operation. Other
physical activities include those physical activities required to
establish and maintain conserving cover crops on CRP acreages and those
physical activities necessary in livestock operations.
Active personal management means personally providing and
participating in:
(1) The general supervision and direction of activities and labor
involved in the farming operation; or
(2) Services (whether performed on-site or off-site) reasonably
related and necessary to the farming operation, including:
(i) Supervision of activities necessary in the farming operation,
including activities involved in land preparation, planting,
cultivating, harvesting, and marketing of agricultural commodities, as
well as activities required to establish and maintain conserving cover
crops on CRP acreage and activities required in livestock operations;
(ii) Business-related actions, which include discretionary decision
making;
(iii) Evaluation of the financial condition and needs of the
farming operation;
(iv) Assistance in the structuring or preparation of financial
reports or analyses for the farming operation;
(v) Consultations in or structuring of business-related financing
arrangements for the farming operation;
(vi) Marketing and promotion of agricultural commodities produced
by the farming operation;
(vii) Acquiring technical information used in the farming
operation; and
(viii) Any other management function reasonably necessary to
conduct the farming operation and for which service the farming
operation would ordinarily be charged a fee.
Administrator means the Administrator of the Farm Service Agency
including any designee of the Administrator.
Alien means any person not a citizen or national of the United
States.
Attribution means the combination of any payment made directly to a
person or legal entity with the person's or legal entity's pro rata
direct and indirect interest in payments received by a legal entity,
joint venture, or general partnership.
Average Adjusted Gross Farm Income means the average of the portion
of adjusted gross income of the person or legal entity that is
attributable to activities related to farming, ranching, or forestry
for the 3 taxable years preceding the most immediately preceding
complete taxable year.
Average Adjusted Gross Income means the average of the adjusted
gross income as defined under 26 U.S.C. 62 or comparable measure of the
person or legal entity over the 3 taxable years preceding the most
immediately preceding complete taxable year.
Average Adjusted Gross Nonfarm Income means the difference between
the average adjusted gross income for the person or legal entity and
the average adjusted gross farm income for the person or legal entity.
Capital means the funding provided by a person or legal entity to
the farming operation, independent and separate from all other farming
operations, in order for such operation to conduct farming activities.
In determining whether a person or legal entity has independently
contributed capital, in the form of funding, to the farming operation,
such capital must have been derived from a fund or account separate and
distinct from that of any other person or legal entity involved in such
operation. Capital does not include the value of any labor or
management that is contributed to the farming operation or any outlays
for land or equipment. A capital contribution must be a direct out-of-
pocket input of a specified sum or an amount borrowed by the person or
legal entity and does not include advance program payments.
Chief means the Chief of the Natural Resources Conservation Service
including any designee of the Chief (also referred to in this part as
NRCS Chief).
Contribution means providing land, capital, or equipment assets,
and the actions of providing active personal labor or active personal
management to a farming operation in exchange for, or with the
expectation of, deriving benefit based solely on the success of the
farming operation.
Deputy Administrator means the Deputy Administrator for Farm
Programs, Farm Service Agency including any designee.
Equipment means the machinery and implements needed by the farming
operation to conduct activities of the farming operation, including
machinery and implements involved in land preparation, planting,
cultivating, harvesting, or marketing of the crops involved. Equipment
also includes machinery and implements needed to establish and maintain
conserving cover crops on CRP acreages and those needed to conduct
livestock operations. Such equipment may be leased from any source. If
such equipment is leased from another person or legal entity with an
interest in the farming operation, such equipment must be leased at a
fair market value.
Family member means a person to whom another member in the farming
operation is related as a lineal ancestor, lineal descendant, sibling,
spouse, or otherwise by marriage.
Farming operation means a business enterprise engaged in the
production of agricultural products, commodities, or livestock,
operated by a person, legal entity, or joint operation that is eligible
[[Page 79276]]
to receive payments, directly or indirectly, under one or more of the
programs specified in Sec. 1400.1. A person or legal entity may have
more than one farming operation if such person or legal entity is a
member of one or more joint operations.
Indian tribe means any Indian tribe, band, nation, pueblo, or other
organized group or community, including any Alaska Native village or
regional or village corporation as defined in or established pursuant
to the Alaska Native Claims Settlement Act (43 U.S.C. 1601-1629h),
which is recognized as eligible for special programs and services
provided by the United States to Indians because of their status as
Indians.
Interest in a farming operation means one of the following:
(1) Owner or renter of the land in the farming operation;
(2) An interest in the agricultural products, commodities, or
livestock produced by the farming operation; or
(3) A member of a joint operation that either owns or rents land in
the farming operation or has an interest in the agricultural products,
commodities, or livestock produced by the farming operation.
Irrevocable trust means a trust as specified in this definition.
Any trust not meeting this definition will be considered a revocable
trust. A trust may be considered to be an irrevocable trust only if:
(1) The trust cannot be modified or terminated by the grantor;
(2) The grantor has no future, contingent, or remainder interest in
the corpus of the trust; and
(3) The trust agreement does not provide for the transfer of the
corpus of the trust to the remainder beneficiary in less than 20 years
from the date the trust is established except in cases where the
transfer is contingent upon either the remainder beneficiary achieving
at least the age of majority or the death of the grantor or income
beneficiary.
Joint operation means a general partnership, joint venture, or
other similar business organization in which the members are jointly
and severally liable for the obligations of the organization.
Land means farmland that meets the specific requirements of the
applicable program. Such land may be leased from any source. If such
land is leased from another person or legal entity with an interest in
the crop or crop proceeds, such land must be leased at a fair market
value.
Lawful alien means any person who is not a citizen or national of
the United States but who is admitted into the United States for
permanent residence under the Immigration and Nationality Act and
possesses a valid Alien Registration Receipt Card issued by the United
States Citizenship and Immigration Services, Department of Homeland
Security.
Legal entity means an entity created under Federal or State law and
that:
(1) Owns land or an agricultural commodity, product, or livestock;
or
(2) Produces an agricultural commodity, product, or livestock.
Payment means:
(1) Payments made in accordance with part 1412 or successor
regulation of this chapter;
(2) CRP annual rental payments made in accordance with part 1410 or
successor regulation of this chapter;
(3) NAP payments made in accordance with part 1437 or successor
regulation of this chapter; and
(4) For other programs, any payments designated in individual
program regulations in this chapter.
Person means an individual, natural person and does not include a
legal entity.
Public school means a primary, elementary, secondary school,
college, or university that is directly administered under the
authority of a governmental body or that receives a predominant amount
of its financing from public funds.
Secretary means the Secretary of the United States Department of
Agriculture.
Sharecropper means a person who performs work in connection with
the production of the crop under the supervision of the operator and
who receives a share of such crop in return for the provision of such
labor.
Significant contribution means the provision of the following to a
farming operation:
(1)(i) For land, capital, or equipment contributed independently by
a person or legal entity, a contribution that has a value at least
equal to 50 percent of the person's or legal entity's commensurate
share of the total:
(A) Value of the capital necessary to conduct the farming
operation;
(B) Rental value of the land necessary to conduct the farming
operation; or
(C) Rental value of the equipment necessary to conduct the farming
operation; or
(ii) If the contribution by a person or legal entity consists of
any combination of land, capital, and equipment, such combined
contribution must have a value at least equal to 30 percent of the
person's or legal entity's commensurate share of the total value of the
farming operation;
(2) For active personal labor, an amount contributed by a person to
the farming operation that is described by the smaller of the
following:
(i) 1,000 hours per calendar year; or
(ii) 50 percent of the total hours that would be necessary to
conduct a farming operation that is comparable in size to such person's
or legal entity's commensurate share in the farming operation;
(3) With respect to active personal management, activities that are
critical to the profitability of the farming operation, taking into
consideration the person's or legal entity's commensurate share in the
farming operation; and
(4) With respect to a combination of active personal labor and
active personal management, when neither contribution by itself meets
the requirement of paragraphs (2) and (3) of this definition, a
combination of active personal labor and active personal management
that, when made together, results in a critical impact on the
profitability of the farming operation in an amount at least equal to
either the significant contribution of active personal labor or active
personal management as defined in paragraphs (2) and (3) of this
definition.
Substantial amount of active personal labor means the provision of
active personal labor to a farming operation in an amount described by
the smaller of the following:
(1) 1,000 hours per calendar year; or
(2) 50 percent of the total hours that would be necessary to
conduct a farming operation that is comparable in size to the person's
or legal entity's commensurate share in the farming operation.
Total value of the farming operation means the total of the costs,
excluding the value of active personal labor and active personal
management contributed by a person who is a member of the farming
operation, needed to carry out the farming operation for the year for
which the determination is made.
Sec. 1400.4 Indian Tribe.
Provisions of this part do not apply to Indian tribes as defined in
Sec. 1400.3.
Sec. 1400.5 Denial of program benefits.
(a) All or any part of a payment otherwise due a person or legal
entity on all farms in which the person or legal entity has an interest
may be withheld or be required to be refunded if the person or legal
entity fails to comply with the provisions of this part.
(b) All or any part of a payment otherwise due a person or legal
entity on all farms in which the person or legal entity has an interest
may be withheld
[[Page 79277]]
or be required to be refunded if the person or legal entity fails to
comply with the provisions of this part and adopts or participates in
adopting a scheme or device designed to evade this part, or that has
the effect of evading this part. Such acts may include, but are not
limited to:
(1) Concealing information that affects the application of this
part;
(2) Submitting false or erroneous information; or
(3) Creating a business arrangement using rental agreements and
other arrangements to conceal the interest of a person or legal entity
in a farm or farming operation for the purpose of obtaining program
payments the person or legal entity would otherwise not be eligible to
receive. Indicators of such business arrangement include, but are not
limited to the following:
(i) No crops are grown or agricultural commodities produced by the
represented operation;
(ii) The represented operation has no appreciable assets;
(iii) The only source of capital for the operation is the program
payments; or
(iv) The represented operation exists only for the receipt of
program payments.
(c) If the Deputy Administrator determines that a person or legal
entity has adopted a scheme or device to evade, or that has the purpose
of evading, the provisions of 7 U.S.C. 1308, 1308-1, or 1308-3, as
amended, such person or legal entity will be ineligible to receive
payments under the programs specified in Sec. 1400.1 in the year for
such scheme or device was adopted and the succeeding year.
(d) A person or legal entity that perpetuates a fraud, commits
fraud, or participates in equally serious actions for the benefit of
the person or legal entity, or the benefit of any other person or legal
entity, to exceed the applicable limit on payments or the requirements
of this part will be subject to a five-year denial of all program
benefits. Such other equally serious actions may include, but are not
limited to:
(1) Knowingly engaged in, or aided in the creation of a fraudulent
document;
(2) Failed to disclose material information relevant to the
administration of the provisions of this part, or
(3) Any other actions of a person or legal entity determined by the
Deputy Administrator as designed or intended to circumvent the
provisions of this subpart.
(e) Program payments and benefits will be denied on pro-rata basis:
(1) In accordance to the interest held by the person or legal
entity in any other legal entity or joint operations and
(2) To any person or legal entity that is a cash rent tenant on
land owned or under control of a person or legal entity for which a
determination of this section has been made.
Sec. 1400.6 Joint and several liability.
(a) Any legal entity, including joint ventures and general
partnerships, and any member of a legal entity determined to have
knowingly participated in a scheme or device, or other such equally
serious actions to evade the payment limitation provisions, or that has
the purpose of evading the provisions of this part, will be jointly and
severally liable for any amounts determined to be payable as the result
of the scheme or device, or other such equally serious actions,
including amounts necessary to recover the payments.
(b) Any person or legal entity that cooperates in the enforcement
of the payment limitation and payment eligibility provisions of this
part may be partially or fully released from liability, as determined
by the Executive Vice President, CCC.
(c) The provisions of this section will be applicable in addition
to any liability that arises under a criminal or civil statute.
Sec. 1400.7 Commensurate contributions and risk.
(a) In order to be considered eligible to receive payments under
the programs specified in Sec. 1400.1, a person or legal entity
specified in Sec. Sec. 1400.202 through 1400.210 must have:
(1) A share of the profits or losses from the farming operation
commensurate with the person's or legal entity's contribution(s) to the
operation;
(2) Contribution(s) to the farming operation that are at risk for a
loss; and
(3) Risk that is commensurate with the person's or legal entity's
claimed share of the farming operation.
(b) [Reserved]
Sec. 1400.8 Equitable treatment.
(a) Actions taken by a person or legal entity in good faith based
on action or advice of an authorized representative of the
Administrator may be accepted as meeting the requirements of this part
to the extent the Administrator deems necessary to provide fair and
equitable treatment to such person or legal entity.
(b) Actions taken by a person or legal entity in good faith based
on action or advice of an authorized representative of the NRCS Chief
may be accepted as meeting the requirements of this part to the extent
the NRCS Chief deems necessary to provide fair and equitable treatment
to such person or legal entity.
Sec. 1400.9 Appeals.
(a) A person or legal entity may obtain reconsideration and review
of determinations made under this part in accordance with the appeal
regulations set forth in part 780 of this title. With respect to such
appeals, the applicable reviewing authority will:
(1) Schedule a hearing with respect to the appeal within 45 days
following receipt of the written appeal and
(2) Issue a determination within 60 days following the hearing.
(b) The time limitations provided in paragraph (a) will not apply
if:
(1) The appellant, or the appellant's representative, requests a
postponement of the scheduled hearing;
(2) The appellant, or the appellant's representative, requests
additional time following the hearing to present additional information
or a written closing statement;
(3) The appellant has not timely presented information to the
reviewing authority; or
(4) An investigation by the Office of Inspector General is ongoing
or a court proceeding is involved that affects the amount of payments a
person may receive.
(c) If the deadlines provided in paragraphs (a) and (b) of this
section are not met, the relief sought by the producer's appeal will be
granted for the applicable crop year unless the Deputy Administrator
determines that the producer did not follow the farm operating plan
initially presented to the county committee for the year that is the
subject of the appeal.
(d) An appellant may waive the provisions of paragraphs (a) and (b)
of this section.
Subpart B--Payment Limitation
Sec. 1400.100 Revocable trust.
A revocable trust and the grantor of the trust will be considered
to be the same person.
Sec. 1400.101 Minor children.
(a) Except as provided in paragraph (b) of this section, payments
received by a child under 18 years of age as of April 1 of the
applicable crop, program, or fiscal year, including such a person who
is the beneficiary of a trust or who is an heir of an estate, will be
attributed for the entire crop, program, or fiscal year to the parent
receiving the greater amount of program payments subject to this part
or to any court-appointed person such as a guardian or conservator who
is responsible for the minor.
[[Page 79278]]
(b) Payments received by a minor will not be attributed to the
minor's parent or to any court-appointed person such as a guardian or
conservator who is responsible for the minor if all of the following
apply:
(1) The minor is a producer on a farm and the minor's parents or
any court-appointed person such as guardian or conservator who is
responsible for the minor, does not have any interest in the farm;
(2) The minor has established and maintains a separate household
from the minor's parents or any court-appointed person such as a
guardian or conservator who is responsible for the minor, and such
minor personally carries out the farming activities with respect to the
minor's farming operation for which there is a separate accounting; and
(3) The minor does not live in the same household as such minor's
parents and:
(i) Is represented by a court-appointed guardian or conservator who
is responsible for the minor and
(ii) Ownership of the farm is vested in the minor.
(c) A person will be considered to be a minor until the age 18 is
reached. Court proceedings conferring majority on a person under 18
years of age will not change such person's status as a minor.
Sec. 1400.102 States, political subdivisions, and agencies thereof.
(a) A State, political subdivision, and agency thereof, is not
eligible for payments or benefits under programs specified in Sec.
1400.1, unless the exception provided in paragraph (b) of this section
applies.
(b) Subject to the limitation in paragraph (c) of this section, a
State, political subdivision, and any agency thereof, may receive
payments or benefits under programs specified in Sec. 1400.1 if both
of the following apply:
(1) The land for which payments are received is owned by the State,
political subdivision, or agency thereof and
(2) The payments are used solely for the support of public schools;
(c) The total payments described in paragraph (b) of this section
cannot exceed $500,000 annually except with respect to payments made
with respect to the following States: Alaska, Delaware, Hawaii, Idaho,
Maine, Montana, North Dakota, New Hampshire, Rhode Island, South
Dakota, Vermont, and Wyoming. The list of States that meet the criteria
in paragraph (c) of this section may change due to changes in
population of any State.
Sec. 1400.103 Charitable organizations.
(a) A charitable organization, including a club, society, fraternal
organization, or religious organization will be considered a separate
legal entity for payment limitation purposes to the extent that such an
entity is independently engaged in the production of crops,
agricultural commodities, or livestock, except where the land or the
proceeds from the farming operation may transfer to a legal entity that
exercises control or authority over such organization.
(b) If the land or the proceeds from the farming operation may
transfer to a legal entity that exercises control or authority over the
charitable organization, payments to the charitable organization will
be attributed to the parent organization.
Sec. 1400.104 Changes in farming operations.
(a) Any change in a farming operation that would increase the
number of persons or legal entities to which the provisions of this
part apply must be bona fide and substantive. If bona fide, the
following will be considered to be a substantive change in the farming
operation:
(1) The addition of a family member to a farming operation in
accordance with Sec. 1400.208, except that such an addition will not
affect the status of any other person or legal entity that is added to
the farming operation;
(2) With respect to a landowner only, a change from a cash rent to
a share rent;
(3) An increase through the acquisition of base acres not
previously involved in the farming operation of at least 20 percent or
more in the total base acres involved in the farming operation.
(i) For the purpose of payment limitations, such an increase in
base acres will be considered an applicable bona fide and substantive
change for the increase of only one person or legal entity to the
farming operation, unless;
(ii) A representative of the State FSA office determines, based on
the magnitude and complexity of the change represented, the increase in
base acres supports additional persons or legal entities to the farming
operation.
(4) A change in ownership by sale or gift of equipment from a
person or legal entity previously engaged in a farming operation to a
person or legal entity that has not been involved in such operation.
The sale or gift of equipment will be considered to be bona fide and
substantive only if:
(i) The transferred amount of such equipment is commensurate with
the new person's or legal entity's share of the farming operation,
(ii) The sale or gift of the equipment was based on the equipment's
fair market value,
(iii) The former owner of the equipment has no control over such
equipment,
(iv) The transaction was not financed by the former owner, and
(v) Preference was not given to the former owner to re-purchase the
equipment at a later date.
(5) A change in ownership by sale or gift of land from a person or
legal entity who previously has been engaged in a farming operation to
a person or legal entity that has not been involved in such operation.
The sale or gift of land will be considered to be bona fide and
substantive only if:
(i) The transferred amount of such land is commensurate with the
new person's or legal entity's share of the farming operation,
(ii) The sale or gift of land was based on the land's fair market
value,
(iii) The former owner of the land has no control over such land,
(iv) The transaction was not financed by the former owner, and
(v) Preference was not given to the former owner to re-purchase the
land at a later date.
(b) Unless the requirements in paragraph (a) of this section are
met, the increase in persons or legal entities in the farming operation
will not be recognized for payment limitation purposes and the
additional persons or legal entities are not eligible for program
payment identified in Sec. 1400.1 otherwise resulting from the farming
operation.
Sec. 1400.105 Attribution of payments.
(a) A payment made directly to a person or legal entity will be
combined with the pro rata interest of the person or legal entity in
payments received by a legal entity in which the person or legal entity
has a direct or indirect ownership interest, unless the payments of the
legal entity have been reduced by the pro rata share of the person or
legal entity.
(b) A payment made to a legal entity will be attributed to those
persons who have a direct and indirect ownership interest in the legal
entity, unless the payment of the legal entity has been reduced by the
pro rata share of the person.
(c) Attribution of payments made to legal entities will be tracked
through four levels of ownership in legal entities as follows:
(1) First level of ownership--any payment made to a legal entity
that is owned in whole or in part by a person will be attributed to the
person in an
[[Page 79279]]
amount that represents the direct ownership interest in the first-tier
or payment legal entity;
(2)(i) Second level of ownership--any payment made to a first-tier
legal entity that is owned in whole or in part by another legal entity
(referred to as a second-tier legal entity) will be attributed to the
second-tier legal entity in proportion to the ownership of the second-
tier legal entity in the first-tier legal entity;
(ii) If the second-tier legal entity is owned in whole or in part
by a person, the amount of the payment made to the first-tier legal
entity will be attributed to the person in the amount that represents
the indirect ownership in the first-tier legal entity by the person.
(3) Third and fourth levels--except as provided in paragraph
(2)(ii) of this section, any payments made to a legal entity at the
third and fourth tiers of ownership will be attributed in the same
manner as specified in paragraph (2)(i) of this section.
(4) Fourth-tier ownership--if the fourth-tier of ownership is that
of a legal entity and not that of a person, a reduction in payment will
be applied to the first-tier or payment legal entity in the amount that
represents the indirect ownership in the first-tier or payment legal
entity by the fourth-tier legal entity.
(d) For purposes of administering direct attribution, and to
determine a person's or legal entity's ownership interest in a legal
entity that receives a payment subject to limitation; the ownership
interest on June 1 of each year will be used.
(e) Direct attribution of payments is not applicable to a
cooperative association of producers with respect to commodities
produced by the members of the association that are marketed by the
association on behalf of the members of the association. The payments
will instead be attributed to the producers as persons.
Sec. 1400.106 Payment limits.
(a) Payments made to a person or legal entity will not exceed the
amounts specified in subpart A of this part.
(b) Payments made to a joint venture or general partnership cannot
exceed, for each payment specified in subpart A of this part, the
amount determined by multiplying the maximum payment amount specified
in subpart A of this part by the number of persons and legal entities,
other than joint ventures and general partnerships, that comprise the
ownership of the joint venture or general partnership.
(c) Payments made to a legal entity will be reduced proportionately
by an amount that represents the direct or indirect ownership in the
legal entity by any person or legal entity that has otherwise reached
the applicable maximum payment limitation.
Sec. 1400.107 Notification of interests.
(a) In order to be eligible to receive any payment specified in
subpart A of this part, or any other program as provided in individual
program regulations in this chapter, a person or legal entity must,
provide information in the manner as prescribed by the Deputy
Administrator.
(b) The information required to be submitted under paragraph (a) of
this section must include:
(1) The name and social security number of each person, or the name
and taxpayer identification number of each legal entity, that holds or
acquires an ownership interest in the legal entity and
(2) The name and taxpayer identification number of each legal
entity in which the person or legal entity holds an ownership interest.
Subpart C--Payment Eligibility
Sec. 1400.201 General provisions for determining whether a person or
legal entity is actively engaged in farming.
(a) To be considered eligible to receive payments with respect to a
particular farming operation, a person or legal entity must be actively
engaged in farming with respect to such operation.
(b) Actively engaged in farming means, except as otherwise provided
in this part, that the person or legal entity:
(1) Independently and separately makes a significant contribution
to a farming operation of:
(i) Capital, equipment, or land, or a combination of capital,
equipment, or land and
(ii) Active personal labor or active personal management, or a
combination of active personal labor and active personal management;
(2) Has a share of the profits or losses from the farming operation
commensurate with the person's or legal entity's contributions to the
operation; and
(3) Makes contributions to the farming operation that are at risk
for a loss, with the level of risk being commensurate with the person's
or legal entity's claimed share of the farming operation.
(c) All of the following factors will be taken into consideration
in determining if the person or legal entity is independently and
separately contributing a significant amount of capital, equipment, or
land, or a combination of capital, equipment, or land, to the farming
operation:
(1) A separate and distinct interest in the land, crop, and
livestock involved in the farming operation;
(2) The demonstration of separate and total responsibility for the
interest in the land, crop, and livestock in the farming operation; and
(3) All funds and business accounts of the farming operation are
separate from that of any other person and legal entity.
(d) In determining if the person or legal entity is independently
and separately contributing a significant amount of active personal
labor or active personal management, all of the following factors will
be taken into consideration:
(1) The types of crops and livestock produced by the farming
operation;
(2) The normal and customary farming practices of the area;
(3) The total amount of labor and management necessary for such a
farming operation in the area; and
(4) Whether the person or legal entity receives compensation for
the labor and management activities.
Sec. 1400.202 Persons.
(a) A person will be considered to be actively engaged in farming
with respect to a farming operation if:
(1) The person independently and separately makes a significant
contribution to a farming operation of:
(i) Capital, equipment, or land, or a combination of capital,
equipment, or land and
(ii) Active personal labor or active personal management, or a
combination of active personal labor and active personal management;
(2) Has a share of the profits or losses from the farming operation
commensurate with the person's or legal entity's contributions to the
operation; and
(3) Makes contributions to the farming operation that are at risk
for a loss, with the level of risk being commensurate with the person's
or legal entity's claimed share of the farming operation.
(b) If one spouse, or an estate of a deceased spouse, is determined
to be actively engaged in farming as specified in paragraph (a) of this
section, the other spouse is considered to have made a significant
contribution, as specified in paragraph (a)(1)(ii) of this section,
only to the same farming operation.
(c) If a farming operation is conducted by a person, and the
capital, land, or equipment is contributed by the person, such capital,
land, or equipment:
(1) Must be contributed directly by the person and must not be
acquired as a result of a loan made to, guaranteed, co-signed, or
secured by:
[[Page 79280]]
(i) Any other person, joint operation, or legal entity that has an
interest in such farming operation;
(ii) Such person, joint operation, or legal entity by any other
person, joint operation, or legal entity that has an interest in such
farming operation or
(iii) Any other person, joint operation, or legal entity in whose
farming operation such person, joint operation, or legal entity has an
interest; and
(2) If acquired as a loan made to, guaranteed, co-signed, or
secured by the persons, joint operations, or legal entities, the loan
must:
(i) Bear the prevailing interest rate and
(ii) Have a repayment schedule considered reasonable and customary
for the area.
Sec. 1400.203 Joint operations.
(a) A member of a joint operation will be considered to be actively
engaged in farming with respect to a farming operation if the member:
(1) Makes a significant contribution of:
(i) Capital, equipment, or land or a combination of capital,
equipment, or land and
(ii) Active personal labor or active personal management, or a
combination of active personal labor and active personal management,
and that are:
(A) Performed on a regular basis,
(B) Identifiable and documentable, and
(C) Separate and distinct from such contributions of any other
member of the farming operation;
(2) Has a share of the profits or losses from the farming operation
commensurate with the member's contributions to the operation; and
(3) Makes contributions to the farming operation that are at risk
for a loss, with the level of risk being commensurate with the member's
claimed share of the farming operation.
(b) For a farming operation conducted by a joint operation in which
the capital, land, or equipment is contributed by such joint operation,
such capital, land, or equipment:
(1) Must be contributed directly by the joint operation and must
not be acquired as a loan made to, guaranteed, co-signed, or secured
by:
(i) Any person, legal entity, or other joint operation that has an
interest in such farming operation, including either joint operation's
members;
(ii) Such joint operation by any person, legal entity, or other
joint operation that has an interest in such farming operation; or
(iii) Any person, legal entity, or other joint operation in whose
farming operation such joint operation has an interest, and
(2) If acquired as a result of a loan made to, guaranteed, co-
signed, or secured by the persons, legal entities, or joint operations
with an interest in the operation as defined, the loan must:
(i) Bear the prevailing interest rate and
(ii) Have a repayment schedule considered reasonable and customary
for the area.
(c) If a joint operation separately makes a significant
contribution of capital, equipment, or land, or a combination of
capital, equipment, or land, and the joint operation meets the
provisions of Sec. 1400.201(b)(2) and (b)(3), the members of the joint
operation who make a significant contribution of active personal labor,
active personal management, or a combination of active personal labor
and active personal management to the farming operation as specified in
paragraph (a)(1)(ii) of this section will be considered to be actively
engaged in farming with respect to such farming operation.
Sec. 1400.204 Limited partnerships, limited liability partnerships,
limited liability companies, corporations, and other similar legal
entities.
(a) A limited partnership, limited liability partnership, limited
liability company, corporation, or other similar legal entity will be
considered to be actively engaged in farming with respect to a farming
operation if:
(1) The legal entity independently and separately makes a
significant contribution to the farming operation of capital,
equipment, or land, or a combination of capital, equipment, or land;
(2) Each partner, stockholder, or member with an ownership interest
makes a contribution, whether compensated or not compensated, of active
personal labor, active personal management, or a combination of active
personal labor and active personal management to the farming operation;
that are:
(i) Performed on a regular basis;
(ii) Identifiable and documentable; and
(iii) Separate and distinct from such contributions of any other
partner, stockholder or member of the farming operation;
(3) The contribution of the partners, stockholders and members is
significant and commensurate;
(4) The legal entity has a share of the profits or losses from the
farming operation commensurate with the legal entity's contributions to
the operation; and
(5) The legal entity makes contributions to the farming operation
that are at risk for a loss, with the level of risk being commensurate
with the legal entity's claimed share of the farming operation.
(b) If any partner, stockholder, or member fails to meet the
requirements in paragraph (a)(2) of this section, any program payment
and benefit subject to this subpart provided to the legal entity will
be reduced by an amount commensurate with the ownership share held by
that partner, stockholder, or member in the legal entity.
(c) For a farming operation conducted by a legal entity in which
the capital, land, or equipment is contributed by the legal entity,
such capital, land, or equipment:
(1) Must be contributed directly by the legal entity and must not
be acquired as a loan made to, guaranteed, co-signed, or secured by:
(i) Any person, legal entity, or joint operation that has an
interest in such farming operation, including the legal entity's
members;
(ii) Such joint operation by any person, legal entity, or other
joint operation that has an interest in such farming operation; or
(iii) Any person, legal entity, or joint operation in whose farming
operation such legal entity has an interest, and
(2) If acquired as a result of a loan made to, guaranteed, co-
signed, or secured by the persons, legal entities, or joint operations
as defined, the loan must:
(i) Bear the prevailing interest rate and
(ii) Have a repayment schedule considered reasonable and customary
for the area.
Sec. 1400.205 Trusts.
A trust will be considered to be actively engaged in farming with
respect to a farming operation if:
(a) The trust independently and separately makes a significant
contribution to the farming operation of capital, equipment, or land,
or a combination of capital, equipment, or land;
(b) The income beneficiaries collectively make a significant
contribution of active personal labor or active personal management, or
a combination of active personal labor and active personal management
to the farming operation. The combined interest of all the income
beneficiaries providing active personal labor or active personal
management, or a combination of active personal labor and active
personal management, must be at least 50 percent;
[[Page 79281]]
(c) The trust has a share of the profits or losses from the farming
operation commensurate with the legal entity's contributions to the
operation;
(d) The trust makes contributions to the farming operation that are
at risk for a loss, with the level of risk being commensurate with the
legal entity's claimed share of the farming operation;
(e) The trust has provided a tax identification number of the trust
unless the trust is a revocable trust and the grantor is the sole
income beneficiary; and
(f) The trust has provided a copy of the trust agreement to the
county committee unless the trust is a revocable trust.
Sec. 1400.206 Estates.
(a) For 2 program years after the program year in which a person
dies, the person's estate will be considered to be actively engaged in
farming if:
(1) The estate, as a legal entity, makes a significant contribution
of either:
(i) Capital, equipment, or land or
(ii) A combination of capital, equipment, or land; and
(2) The personal representative or heirs of the estate collectively
make a significant contribution of either:
(i) Active personal labor or active personal management or
(ii) The combination of active personal labor and active personal
management; and
(3) The estate has a share of the profits or losses from the
farming operation commensurate with the legal entity's contributions to
the operation;
(4) The estate makes contributions to the farming operation that
are at risk for a loss, with the level of risk being commensurate with
the legal entity's claimed share of the farming operation; and
(5) The representative of the estate has provided a tax
identification number for the estate and a copy of a court order, will,
or other legal document that identifies the heir(s) and tax
identification number(s) of the heir(s).
(b) After the period set forth in paragraph (a) of this section,
the deceased person's estate will not be considered to be actively
engaged in farming unless, on a case by case basis, the Deputy
Administrator determines, for the purpose of obtaining program
payments, that the estate has not been settled.
Sec. 1400.207 Landowners.
(a) A person or legal entity that is a landowner, including
landowners with an undivided interest in land, making a significant
contribution of owned land to the farming operation, will be considered
to be actively engaged in farming with respect to such owned land, if
the landowner:
(1) Receives rent or income for such use of the land based on the
land's production or the operation's operating results;
(2) Has a share of the profits or losses from the farming operation
commensurate with the landowner's contributions to the operation; and
(3) Makes contributions to the farming operation that are at risk
for a loss, with the level of risk being commensurate with the
landowner's claimed share of the farming operation.
(b) A landowner also includes a member of a joint operation if the
joint operation holds title to land in the name of the joint operation
and if the joint operation or its members submit adequate documentation
to determine that, upon dissolution of the joint operation, the title
to the land owned by the joint operation will revert to such member of
such joint operation.
Sec. 1400.208 Family members.
(a) Notwithstanding the provisions of Sec. Sec. 1400.201 through
1400.206, with respect to a farming operation conducted by persons, a
majority of whom are family members, an adult family member who makes a
significant contribution of active personal labor, active personal
management, or a combination of active personal labor and active
personal management will be considered to be actively engaged in
farming if the adult family member meets the provisions in paragraph
(b) of this section.
(b) An adult family member who elects to be considered actively
engaged in farming under this section must:
(1) Have a share of the profits or losses from the farming
operation commensurate with such person's contributions to the
operation and
(2) Make contributions to the farming operation that are at risk
for a loss, with the level of risk being commensurate with such
person's claimed share of the farming operation.
Sec. 1400.209 Sharecroppers.
(a) Notwithstanding the provisions of Sec. Sec. 1400.201 through
1400.206 of this part, with respect to a person who is a sharecropper,
such person will be considered to be actively engaged in farming if the
sharecropper meets the provisions of paragraph (b) of this section.
(b) A sharecropper who elects to be considered actively engaged in
farming under this section must:
(1) Make a significant contribution of active personal labor to the
farming operation;
(2) Have a share of the profits or losses from the farming
operation commensurate with such person's contribution to the
operation; and
(3) Make a contribution to the farming operation that is at risk
for a loss, with the level of risk being commensurate with such
person's claimed share of the farming operation.
Sec. 1400.210 Deceased and incapacitated persons.
If the person dies or is incapacitated before a determination is
made that the person is ``actively engaged in farming,'' the
representative of the deceased person's estate or the incapacitated
person, or other person if necessary, must provide the determining
authority information to verify that such person did make a conscious
effort to and would have been determined to be actively engaged in
farming if not for the person's death or incapacitation. If the person
dies or is incapacitated after being determined to be ``actively
engaged in farming,'' the determining authority will allow such
determination to be in effect for that program year or fiscal year, as
applicable. However, the following year such person or the person's
estate must meet all necessary requirements in order to be determined
to be ``actively engaged in farming'' for that year.
Sec. 1400.211 Persons and legal entities not considered to be
actively engaged in farming.
Any person or legal entity that does not satisfy all of the
applicable provisions of Sec. Sec. 1400.201 through 1400.210 and a
landowner who rents land to a farming operation for cash or a crop
share guaranteed as to the amount of the commodity will not be
considered to be actively engaged in farming with respect to the
farming operation.
Sec. 1400.212 Growers of hybrid seed.
The existence of a hybrid seed contract for a person or legal
entity will not be taken into account when making an actively engaged
in farming determination with respect to such person or legal entity.
However, such person or legal entity must satisfy all other applicable
provisions of this part.
Sec. 1400.213 Military personnel.
If a person is called to active duty in the military before a
determination is made that the person is actively engaged in farming,
the person may be considered to be actively engaged in farming if the
determining authority determines that such person did make a conscious
effort to, and would have been determined to be, actively engaged
[[Page 79282]]
in farming if the person would not have been called to active duty. If
the person is called to active duty after being determined to be
actively engaged in farming, such determination will remain in effect
for the program year.
Subpart D--Cash Rent Tenants
Sec. 1400.301 Eligibility.
(a) Any tenant that is actively engaged in farming in accordance
with the provisions of subpart C and conducts a farming operation in
which the tenant rents the land for cash, for a crop share guaranteed
as to the amount of the commodity, or by any arrangement in which the
tenant does not compensate the landlord by cash or a crop share, and
receives benefits, with respect to such land under a program specified
in Sec. 1400.1(a)(1) and (2) will not be eligible to receive any
payment with respect to such cash-rented land unless the tenant
independently makes a significant contribution to the farming operation
of:
(1) Active personal labor or
(2) Significant contributions of both active personal management
and equipment.
(b) If the equipment is leased by the tenant from:
(1) The landlord, then the lease must reflect the fair market value
of the equipment leased with a payment schedule considered reasonable
and customary for the area or
(2) The same person or legal entity that is providing hired labor
to the farming operation, then the contracts for the lease of the
equipment and for the hired labor must be two separate contracts.
(c) If the equipment is leased by the tenant from the landlord, or
from the same person or legal entity that is providing hired labor to
the farming operation, then the tenant must exercise complete control
over the leased equipment during the entire current crop year. Complete
control is defined as exclusive access and use by the tenant.
(d) If the cash rent tenant is a joint operation, then each member
must make a significant contribution of active personal labor or active
personal management as specified in Sec. 1400.203(a)(1)(ii) to be
considered eligible for the member's share of the program payments
received by the joint operation on the cash rented land.
(e) If the cash rent tenant is a legal entity, then a significant
contribution of active personal labor or active personal management
must be made to the legal entity as specified in Sec. 1400.204(a)(2)
for the legal entity to be considered eligible for the program payments
on the cash rented land.
Subpart E--Foreign Persons
Sec. 1400.401 Eligibility.
(a) Any person who is not a citizen of the United States or a
lawful alien will be ineligible to receive payments, loans, and
benefits, with respect to any commodity produced, or land set aside
from production, on a farm that is owned or operated by such person
unless such person is providing land, capital, and a substantial amount
of active personal labor on such farm.
(b)(1) A corporation or other legal entity will be ineligible to
receive payments, loans, and benefits if more than 10 percent of the
ownership of the legal entity is held by persons who are not citizens
of the United States or lawful aliens unless each foreign person who is
a stockholder or other type of member provides a substantial amount of
active personal labor in the production of crops on a farm owned or
operated by such a legal entity. However, upon the written request of
the legal entity, the Deputy Administrator may make payments in an
amount determined by the Deputy Administrator to be representative of
the percentage interest of the legal entity that is owned by citizens
of the United States and lawful aliens or foreign stockholders or other
type of member who provide a significant contribution of active
personal labor in the production of crops on a farm owned or operated
by such legal entity.
(2) In determining whether more than 10 percent of the ownership of
a legal entity is held by persons who are not citizens of the United
States or by lawful aliens, the ownership interest will be the higher
of the amount of such interest on:
(i) The date the applicable program contract or agreement is
executed by the legal entity or
(ii) Any other date prior to the final harvest date that is
determined and announced by the Deputy Administrator to be normal in
the area for the applicable program crop.
(3) A corporation or other legal entity must inform the county
committee of any increase in such ownership that occurs after the
applicable program contract or agreement is executed.
(4) In the event of an increase in such ownership after a payment,
loan, or benefit has been made, the legal entity will refund such
payment, loan, or benefit.
(5) Where there is only one class of stock or other similar unit of
ownership, a person's or legal entity's percentage share of the limited
partnership, corporation, or other similar legal entity will be based
upon the outstanding shares of stock or other similar unit of ownership
held by the person or legal entity as compared to the total outstanding
shares of stock or other similar unit of ownership. If the limited
partnership, corporation, or other similar legal entity has more than
one class of stock or other unit of ownership, the percentage share of
the limited partnership, corporation or other similar legal entity
owned by a person or legal entity will be determined by the Deputy
Administrator on the basis of market quotations. If market quotations
are unavailable or so infrequent that they do not represent fair market
value, such percentage share will be determined by the Deputy
Administrator on the basis of all relevant factors affecting the fair
market value of such stock or other unit of ownership, including the
various rights and privileges that are attributed to each such class.
(c) A citizen of the United States, lawful alien, or legal entity
that is not subject to this part who is in lawful possession, through a
lease or otherwise, of a farm owned by a person or legal entity who is
subject to this part may receive a payment, loan, and benefit without
regard to this part.
Sec. 1400.402 Notification.
(a) Any legal entity, whether foreign or domestic, that executes a
program contract or agreement under which a payment, loan, or benefit
may be available must provide written notification to the county
committee in the county where the legal entity conducts its farming
operation if:
(1) Any person, group of persons, legal entity, or group of legal
entities holds more than a 10 percent interest in such legal entity;
and
(2) Such person, group of persons, legal entity, or group of legal
entities, in accordance with Sec. 1400.401, are ineligible to receive
a payment, loan, or benefit.
(b) Such written notification must include the name and social
security number or taxpayer identification number of such a person or
legal entity, if known, and of all persons and legal entities that hold
an interest in the legal entity.
(c) The failure of the legal entity to provide this information
will result in the ineligibility of the legal entity to receive any
payment, loan, or benefit.
[[Page 79283]]
Subpart F--Average Adjusted Gross Income Limitation
Sec. 1400.500 Applicability.
(a) For the 2009 through 2012 crop, program, or fiscal years, a
person or legal entity, other than a joint venture or general
partnership, will not be eligible to receive, directly or indirectly,
certain program payments or benefits described in Sec. 1400.1 if the
average adjusted gross income of the person or legal entity exceeds the
amounts in paragraphs (b) through (d) of this section for the 3 taxable
years preceding the most immediately preceding complete taxable year,
as determined by the Deputy Administrator.
(b) For 2009 through 2012 commodity programs set forth in Sec.
1400.1, a person or legal entity with an average adjusted gross nonfarm
income as defined in Sec. 1400.3 that exceeds $500,000 will not be
eligible to receive program payments or benefits as identified in Sec.
1400.1.
(c) For 2009 through 2012 commodity programs set forth in Sec.
1400.1, a person or legal entity that has an average adjusted gross
farm income as defined in Sec. 1400.3 that exceeds $750,000 will not
be eligible to receive a direct payment and other payments made
applicable by statute or regulation.
(d) For 2009 through 2012 conservation programs set forth in Sec.
1400.1, a person or legal entity that has an average adjusted gross
nonfarm income as defined in Sec. 1400.3 that exceeds $1,000,000 will
not be eligible to receive payments or benefits under conservation and
related programs, and other programs made applicable by statute or
regulation, unless:
(1) Not less than 66.66 percent of the of the average adjusted
gross income of the person or legal entity is average adjusted gross
farm income or
(2) This limitation may be waived on a case-by-case basis by the
Administrator or NRCS Chief for the protection of environmentally
sensitive land of special significance. Such a written waiver request
must document that land within or adjacent to the producer's
agricultural operation contains critical resources such as, but not
limited to, threatened, endangered, or at-risk species; historical or
cultural resources; unique wetlands; or critical groundwater recharge
areas. In addition, the waiver request must either:
(i) Show that use of conservation program funding by an individual
producer is critical to the success of a project that benefits multiple
producers in a community, watershed, or other geographic area or
(ii) Achieve enduring conservation treatment through use of a long-
term agreement that is greater than 15 years in duration or through use
of a deed restriction on the land.
(e) Determinations made under this subpart with regard to
conservation programs will be based on the year for which the
conservation program contract or agreement is approved and the
determination will apply for the entire term of the subject agreement
or contract.
(f) Vendors that receive payment for technical services provided in
conjunction with programs made subject to this subpart by regulation or
statute, but who are not beneficiaries of the program, are not subject
to this subpart for services that are of the type that are also
performed by the Federal Government in connection with such programs.
(g) Payments to an escrow agent, or other legal entity of similar
capacity in which the recipient is maintaining temporary custody of the
funds for eventual disbursement to an eligible program participant, are
not subject to this subpart so long as the party ultimately receiving
the payment is eligible under this subpart.
(h) Payments to States, counties, political subdivisions and
agencies thereof, and Indian tribes as defined in Sec. 1400.3 are not
subject to this subpart.
Sec. 1400.501 Determination of average adjusted gross income.
(a) Except as otherwise provided in this subpart, average adjusted
gross farm income of a person or legal entity includes income or
benefits derived from or related to the following:
(1) Production of crops, specialty crops, and unfinished raw
forestry products;
(2) The production of livestock, including but not limited to,
cattle, elk, reindeer, bison, horses, deer, sheep, goats, swine,
poultry, fish and other aquaculture products used for food, honeybees,
and products produced by, or derived from, livestock;
(3) The production of farm-based renewable energy;
(4) The sale, including the sale of easements and development
rights, of farm, ranch, forestry land, water or hunting rights, or
environmental benefits;
(5) The rental or lease of land or equipment, used for farming,
ranching, or forestry operations, including water or hunting rights;
(6) The processing, packing, storing, shedding, and transporting of
farm, ranch, and forestry commodities, including renewable energy;
(7) The feeding, rearing, or finishing of livestock;
(8) The sale of land that has been used for agriculture;
(9) Any payment or benefit, including benefits from risk management
practices, crop insurance indemnities, and catastrophic risk protection
plans;
(10) Payments and benefits authorized under any program made
applicable to this subpart by statute or regulation;
(11) Any other activity related to farming, ranching, or forestry,
as determined by the Deputy Administrator; and,
(12) Any income reported on the Schedule F or other schedule used
by the person or legal entity to report income from farming, ranching,
or forestry operations to the Internal Revenue Service.
(b) For the specific purpose of determining the average adjusted
gross farm income under Sec. 1400.500(d)(1), and in addition to Sec.
1400.501(a), the average adjusted gross farm income of a person or
legal entity includes income or benefits derived from the following:
(1) The sale of equipment to conduct farm, ranch, or forestry
operations and
(2) The provision of production inputs and services to farmers,
ranchers, foresters, and farm operations.
(c) Except as otherwise provided in this subpart, adjusted gross
income means:
(1) For a person filing a separate tax return, the amount reported
as ``adjusted gross income'' on the final federal income tax return for
the person for the applicable tax year;
(2) For a person filing a joint tax return, the amount reported as
``adjusted gross income'' on the final federal income tax return for
the applicable tax year unless a certified statement is provided by a
certified public accountant or attorney specifying the manner in which
such income would have been declared and reported if the persons had
filed two separate returns and that this calculation is consistent with
the information supporting the filed joint return;
(3) For a corporation, including a subchapter S corporation, the
total reported ``taxable income'' as reported to the Internal Revenue
Service plus the amount of the charitable contributions as reported on
the final federal income tax return for the applicable tax year;
(4) For a tax exempt legal entity, the ``unrelated business taxable
income'' of the legal entity as reported to the Internal Revenue
Service on the final federal income tax return, less any other income
CCC determines to be from non-commercial activities;
(5) For a limited liability company, limited partnership, limited
liability partnership, or similar type of
[[Page 79284]]
organization, the income from trade or business activities plus the
amount of guaranteed payments to the members as reported to the
Internal Revenue Service on the final federal income tax return for the
applicable tax year; and
(6) For an estate or trust, the adjusted total income plus
charitable deductions as reported to the Internal Revenue Service on
the final federal income tax return for the applicable tax year, or the
amount of net increase in the estate's or trust's value resulting from
its business or investment interests.
(d) For purposes of applying this subpart and calculating the 3-
year average referenced in Sec. 1400.500, that average will be for the
adjusted gross income for the 3 taxable years preceding the most
immediately preceding complete taxable year, as determined by CCC. For
a legal entity that is not required to file a federal income tax
return, or a person or legal entity that did not have taxable income in
one or more tax years, the average will be the adjusted gross income,
including losses, averaged for the 3 taxable years preceding the most
immediately preceding complete taxable year, as determined by CCC. A
new legal entity will have its adjusted gross income averaged only for
those years of the base period for which it was in business; however, a
new legal entity will not be considered ``new'' to the extent it takes
over an existing operation and has any elements of common ownership or
interests with the preceding legal entity, or with persons or legal
entities with an interest in the ``old'' legal entity. When there is
such commonality, income of the ``old'' legal entity will be averaged
with that of the ``new'' legal entity for the base period.
Sec. 1400.502 Compliance and enforcement.
(a) To comply with the average adjusted gross income limitation, a
person or legal entity, including all interest holders in a legal
entity, general partnership, or joint venture, must provide annually
the following as required by CCC:
(1) A certification in the manner prescribed by CCC from a
certified public accountant or attorney that the average adjusted gross
income of the person or legal entity does not exceed the applicable
limitation;
(2) A certification from the person or legal entity that the
average adjusted gross income of the person or legal entity does not
exceed the applicable adjusted gross income limitations;
(3) The relevant Internal Revenue Service documents and supporting
financial data as requested by CCC. Supporting financial data may
include State income tax returns, financial statements, balance sheets,
reports prepared for or provided to another Government agency,
information prepared for a private lender, and other credible
information relating to the amount and source of the person's or legal
entity's income; or
(4) Authorization for CCC to obtain tax data from the Internal
Revenue Service for purposes of verification of compliance with this
subpart.
(b)(1) All persons and legal entities are subject to an audit by
FSA of any information submitted in accordance with this subpart. As a
part of this audit, income tax returns may be requested, and if
requested, must be supplied by all related persons and legal entities.
(2) In addition to any other requirement under any Federal statute,
relevant Federal income tax returns and documentation must be retained
a minimum of two years after the end of the calendar year corresponding
to the year for which payments or benefits are requested.
(c) Failure to provide necessary and accurate information to verify
compliance, or failure to comply with this subpart's requirements, will
result in ineligibility for all program benefits subject to this
subpart for the year or years subject to the request.
Sec. 1400.503 Commensurate reduction.
(a) Any program payment or benefit subject to this subpart provided
to a legal entity, general partnership, or joint venture will be
reduced by an amount commensurate with the direct and indirect
ownership interest in the legal entity, general partnership, or joint
venture of each person or legal entity determined to have an average
adjusted gross income in excess of the applicable limitation under the
standards provided elsewhere in this subpart for the direct recipient
of such payments.
(b) Ownership interest in a legal entity will be reviewed to the
fourth level of ownership, as specified in Sec. 1400.105, to determine
whether a commensurate reduction is applicable and the extent of such
reduction. If an ownership interest is not held by a person in the
fourth level of ownership in a legal entity, no payment or benefit will
be made with respect to such interest.
Signed in Washington, DC, on December 19, 2008.
Glen L. Keppy,
Acting Executive Vice President, Commodity Credit Corporation.
[FR Doc. E8-30764 Filed 12-23-08; 11:15 am]
BILLING CODE 3410-05-P