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USDA reverses payment limit rule

TAGS: Policy
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“Actively engaged” loophole expanded again after USDA tried to close it in August 2020 final rule.

The U.S. Department of Agriculture's Farm Service Agency (FSA), on behalf of the Commodity Credit Corp. (CCC), amended its regulations concerning payment limitation and eligibility through a final rule published in the Federal Register on Aug. 21, 2020. The agency said a correction issued Nov. 19 restores the previous definitions of “active personal management,” “significant contribution,” “significant contribution of active personal management” and “significant contribution of the combination of active personal labor and active personal management.”

“After publication of the rule, stakeholders notified FSA of concerns regarding potential non-intended, adverse effects to farming operations comprised solely of family members. In streamlining the definitions for consistency, these revised definitions were inadvertently made applicable to farming operations solely owned by family members. This was not the intent of this rule change, and as revised, the definitions were more restrictive than they needed to be in order to provide intended consistency in the rule,” the correction published in the Federal Register noted.

The 2018 farm bill expanded the types of family members eligible to receive payments to include first cousins, nieces and nephews, in addition to children, grandparents and siblings, while simultaneously ensuring that only those family members who were actively engaged in the farm business would be eligible for farm program payments. To be eligible for a payment under the August final rule, a recipient must provide either 25% of a farm’s total management hours or perform at least 500 hours of management annually on a “regular, continuous and substantial” basis.

Sen. Chuck Grassley (R., Iowa), a longtime advocate for closing the loopholes in the payment limits, said, “As both a family farmer and senator, I’ve worked with the USDA over the years in good faith to ensure these programs are used for their intended purposes and aren’t being taken advantage of. It’s a shame that USDA is backtracking after just finalizing a fair rule for this program a couple of months ago.”

Grassley said this is particularly concerning after the Government Accountability Office (GAO) just published a report confirming that farm payments need additional oversight and that 19 of the top 20 operations that use these loopholes are in the South. “This revision of the final rule has not deterred me. I’ll continue to work with my colleagues in Congress to fix this broken system in the next farm bill,” he said.

Grassley's amendment to close a loophole allowing an unlimited number of so-called managers to qualify for federal subsidies was included in the last two farm bills during Senate consideration, but the amendment was removed from the final bill in both of the last two farm bill negotiations. Before the last farm bill, GAO documented at least $259 million paid out through the actively engaged loophole Grassley’s amendment sought to close.

“The Trump Administration’s final rule issued just three short months ago correctly interpreted Congress’ intent that farm subsidies be limited to people who derive their livelihoods from and are actively engaged in farming,” said Eric Deeble, policy director for the National Sustainable Agriculture Coalition.

Deeble said the revision is a “complete reversal and repudiation of the final rule from August. The original final rule clearly reflected the bipartisan consensus to close one of the biggest loopholes in the payment limitation of farm subsidies. The Administration’s contention that the final rule -- which limits farm payments to family members that really work on a farm, rather than those that only do so on paper -- was done in error by Congress and USDA is a lie. Issuing this ‘correction’ to a final rule flouts congressional intent, invites legal challenge and provides a windfall for the biggest, most complex farming operations while ignoring real family farmers who need the assistance.”

Deeble added, “A 180-degree about-face on an already-final rule reeks of an election campaign season payoff. The new rule will use taxpayer money to foster farm consolidation, putting family farmers and beginning farmers at a severe disadvantage. We trust that the incoming Biden Administration will revoke this parting gift and put the teeth back in the farm bill’s payment limit to ensure fairness and stop subsidizing economic concentration.”

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