USDA Makes AGI Payment Changes

Interim regs lower AGI limits, redefine farm income and active role definitions.

Published on: Jan 5, 2009

New interim regulations for the Adjusted Gross Income qualifications, payment limitations and other changes were recently announced. Brymer Humphreys, Executive Director of USDA's Farm Service Agency in New York, explains some of the changes to meet the 2008 Farm Bill requirements.

"Changes to program participation rules and qualifying income requirements will make farm program payments more defendable to America's taxpayers," states Humphreys. "This is a step toward ensuring that program benefits are targeted to active qualifying farmers and ranchers."

For commodity and disaster programs, the AGI limitation was reduced from $2.5 million from all sources to a three-year average non-farm AGI of $500,000. A person or entity won't be eligible if the non-farm AGI exceeds $500,000. Such individuals or entities must have a three-year average AGI less than or equal to $750,000 per year from farm income to qualify for direct payments issued under the Direct and Counter-cyclical Program.

The definition of income derived from farming, ranching and forestry operations was expanded to include packing, storing and transporting of ag commodities; production of livestock products and farm-based renewable bio-energy.

For conservation programs, the average nonfarm AGI limitation is $1 million or less for eligibility. But individuals or entities wuth non-farm AGI in excess of $1 million remain eligible for conservation programs if 66.66% or more of the total AGI is derived from farming, ranching and forestry operations. And, the conservation AGI limitation may be waived on a case-by-case basis if environmentally sensitive land of special significance would be protected.

Program payments are limited to individuals or entities owning land or an agricultural commodity, product or livestock. Qualifying spouses are eligible to be considered separate persons, rather than being automatically combined under one limitation.

States, local governments, political subdivisions, and other agencies are now ineligible, unless the lands are used to support public schools. Payments under this exception are limited to $500,000 annually, and waived for states having populations of less than 1.5 million.

Individuals and entities must be "actively engaged in farming" with respect to a farming operation in order to be eligible for specified payments and benefits. To be "actively engaged in farming," the individual or entity must make significant contributions to the farming operation of: (1) capital, equipment, land, or a combination; and (2) personal labor or active personal management, or a combination.

Under the interim final rule, the addition of individuals or entities to an existing operation to qualify for additional payments is more restrictive.