The final rule “closes a loophole where individuals who were not actively part of farm management still received payments,” USDA said in a release.
USDA earlier this year proposed an update to the definition of “actively engaged” relative to receiving farm program benefits, a definition that had not been addressed since 1987. USDA undertook the effort via a provision in the 2014 Farm Bill requiring them to update the definition. Under the 1987 definition, USDA noted that resulted in some general partnerships and joint ventures adding managers to the farming operation, qualifying for more payments that did not substantially contribute to management.
The rule “only applies to farming operations structured as general partnerships or joint ventures that seek to qualify more than one farm manager.” The rule also requires measureable, documented hours and key management activities each year, USDA said. “Some operations of certain sizes and complexity may be allowed up to three qualifying managers under limited conditions,” USDA said. Specifically, USDA said, “To qualify a total of three farm managers, the operation is required to meet the requirements specified in this rule for both size and complexity. In other words, a very large farm operation that is not complex (for example, one growing a single crop) may only qualify for two farm managers, not three. Under no circumstances is a farming operation allowed to qualify more than a total of three persons as farm managers.”
The new definition for a significant contribution of active personal management requires an annual contribution of 500 hours of management, or at least 25% of the total management required for that operation. “This final rule also adds a new, more specific definition for “active personal management” that includes a list of critical management activities that qualify as a significant contribution if such activities are annually performed to either of the minimum levels established (500 hours or 25 percent of the total management hours required for the operation on an annual basis),” the rule states.
The changes apply to payments for 2016 and subsequent crop years for Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) Programs, Loan Deficiency Payments (LDP) and Marketing Loan Gains (MLG) realized via the Marketing Assistance Loan program. However, USDA also noted in a release on the finalized rule that the “changes go into effect for the 2016 crop year for most farms. Farms that have already planted fall crops for 2016 have until the 2017 crop year to comply.”
The default standard for what constitutes a large farming operation is an operation with crops on more than 2,500 acres (planted or prevented planted) or honey or wool with more than 10,000 hives or 3,500 ewes, respectively, USDA said in the notice to be filed in the Federal Register.
As required by Congress, the new rule does not apply to family farms, or change regulations related to contributions of land, capital, equipment, or labor, USDA noted. A family member is “a person to whom another member in the farming operation is related as a lineal ancestor, lineal descendant, sibling, spouse, or otherwise by marriage.” USDA handbooks further define family member as including “Great grandparent, grandparent, parent, child, including legally adopted children and stepchildren, grandchild, great grandchild, or a spouse or sibling of family members.”