LegiStorm

Summary:

Under the Agricultural Improvement Act of 2018 (P.L. 115-334, 2018 farm bill), U.S. farm program participants—whether individuals or multiperson legal entities—must meet specific eligibility requirements to receive benefits under certain farm programs. Some requirements are common across most programs, while others are specific to individual programs. In addition, program participants are subject to annual payment limits that vary across different combinations of farm programs. Since 1970, Congress has used various policies to address the issue of who should be eligible for farm payments and how much an individual recipient should be permitted to receive in a single year. In recent years, congressional policy has focused on tracking payments through multiperson entities to individual recipients (referred to as direct attribution), ensuring that payments go to persons or entities actively engaged in farming (AEF), capping the amount of payments that a qualifying recipient may receive in any one year, and excluding farmers or farming entities with large average incomes from payment eligibility. Every participating person or legal entity that participates in a farm program must submit identification information. Other eligibility requirements—which may vary across programs—include U.S. citizenship; the nature and extent of an individual's participation (i.e., AEF criteria), including ownership interests in multiperson entities and personal time commitments (whether as labor or management); means testing (persons with combined farm and nonfarm adjusted gross income [AGI] in excess of $900,000 are ineligible for most program benefits); and conservation compliance requirements. For example, under the FY2019 Additional Supplemental Appropriations for Disaster Relief Act (P.L. 116-20), the AGI requirement as it applies to payments under the Market Facilitation Program may be waived if at least 75% of AGI is from farming, ranching, or forestry-related activities. In general, foreign persons (or foreign legal entities) are eligible to participate in farm programs if they meet the eligibility requirements. Exceptions are the four permanent disaster assistance programs created under the 2014 farm bill (P.L. 113-79) and the Noninsured Crop Disaster Assistance program (NAP), which exclude nonresident aliens. Current law requires tracking payments through four levels of ownership in multiperson legal entities to the individual recipients. Current payment limits include a cumulative limit of $125,000 for all covered commodities under the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) support programs, with the exception of peanuts, which has its own $125,000 limit. Only one permanent disaster assistance program—the Livestock Forage Disaster Program (LFP)—is subject to a payment limit ($125,000 per crop year). NAP is also subject to a $125,000 per crop year limit per person for catastrophic coverage. Family farms receive special treatment with respect to payment limits—every adult member (18 years or older) is deemed to meet the AEF requirements and is potentially eligible to receive farm program payments in an amount up to the individual payment limit. Furthermore, the 2018 farm bill extended the definition of family member to include first cousins, nieces, and nephews. Thus, a family farm with a single active farm operator may still qualify for multiple payment limits based on the number of immediate and extended adult family members. Congress addresses program eligibility and payment limit issues in periodic farm legislation. Supporters of payment limits contend that large payments facilitate consolidation of farms into larger units, raise the price of land, and put smaller, family-sized farming operations and beginning farmers at a disadvantage. In addition, they argue that large payments undermine public support for farm subsidies and are costly. Critics of payment limits counter that all farms need support, especially when market prices decline, and that larger farms should not be penalized for the economies of size and efficiencies they have achieved. Further, critics argue that farm payments help U.S. agriculture compete in global markets and that income testing is at odds with federal farm policies directed toward improving U.S. agriculture and its competitiveness. Congress may continue to address these issues, as well as related questions, such as: How does the current policy design of payment limits relate to their distributional impact on crops, regions, and farm size? Is there an optimal aggregation of payment limits across commodities or programs? Do unlimited benefits under the Marketing Assistance Loan (MAL) program reduce the effectiveness of overall payment limits?