Grassley, Feingold Introduce Farm Payment Limits Legislation

Release Date: 

08/04/2010

Contact(s): 

John Crabtree, johnc@cfra.org, Phone: (402) 687-2103 ext. 1010
Lyons, NE - Today, Senator Chuck Grassley (R-IA) and Senator Russ Feingold (D-WI) introduced legislation to establish more stringent farm program payment limits and close legal loopholes that render current statutory limits meaningless. The bill would establish a limit of $250,000 for farm program payments to any individual in an attempt to better target farm program payments to family farmers. The legislation would save the federal treasury more than $1 billion over ten years, conservatively.
"We applaud the Senators for introducing this legislation," said Chuck Hassebrook, Executive Director of the Center for Rural Affairs.  "As we've said many times, the single most effective thing Congress could do to strengthen family sized farms is to stop subsidizing mega-farms to drive their smaller neighbors out of business.  By placing effective caps on farm program payments and preventing mega-farms from gaming the system, this legislation would accomplish that crucial end."
 
According to Hassebrook, the bill caps direct payments at $40,000; counter-cyclical payments at $60,000; and marketing loan gains (including forfeitures), loan deficiency payments, and commodity certificates at $150,000 annually.  The bill also closes loopholes that individuals use to evade current statutory limits.  And the bill improves the standard which the Department of Agriculture uses to determine whether farmers are actively engaged in their operations.
 
"The bill would tighten rules that are supposed to limit payments to active farmers who work the land and their landlords.  Current law is weak.  Investors who participate in one or two conference calls are considered active farmers, allowing mega-farms to get around payment limitations by claiming uninvolved investors as partners," Hassebrook explained.
 
Senator Grassley has sponsored similar legislation previously and offered similar language in both of the last two Farm Bill debates, securing passage of the amendment in the Senate Farm Bill in 2008 but subsequently losing the language in the House-Senate Conference Committee.
 
"Rural America cannot continue to withstand the pressure that unlimited payments create.  The farm program was never intended to help big farmers get bigger, instead it was created to help those who couldn't withstand the political whims of Washington or the fierce reckonings of Mother Nature," Senator Grassley said.  "When ten percent of the nation's farmers receive more than 70% of the payments, it erodes public confidence in federal farm programs, and this legislation is one way to stop that trend from growing."
 
For most of the last decade, Senator Byron Dorgan (D-ND) co-sponsored payment limits legislation and amendments with Senator Grassley.  However, due to his retirement from the Senate after this year, Senator Feingold joined Senator Grassley in co-sponsoring the bill in Senator Dorgan's stead.
 
"For too long large agribusinesses and non-farmers have gamed the limits on farm subsidy programs, taking limited and critical resources better used to support our family farmers that are facing numerous challenges in the current economic climate," Feingold said.  "I have enjoyed working with Senator Grassley to ensure fair competition and contract terms for our farmers and I am pleased to collaborate with him again on this important issue for farmers and taxpayers.  Our legislation is a common sense, bipartisan approach to support Wisconsin family farms, while saving taxpayer dollars."
 
Senator Grassley and Senator Feingold also released a summary of the Rural America Preservation Act of 2010 today, which includes the following:
 
Limit annual per farm commodity subsidy payments to $250,000.  The amendment would establish effective caps of $40,000 on direct (fixed) payments, $60,000 on counter cyclical payments, and $150,000 on loan deficiency payments and marketing loan gains, including gains on generic certificates and forfeited commodities.  The nominal limits would be half these amounts.  The combined limit would be $250,000 (see note [i] below).  These limits would be reduced by varying amounts depending on the farmer's participation in ACRE, essentially setting the payment limitations at the effective caps, less the reductions in direct payments and marketing loan gains.
 
Simplify the complicated legal games now played to avoid the limitation.  Qualifying for the maximum legal payment would be greatly simplified. An individual who participates in just one farming operation could receive double the nominal limit.  That would reduce farmers' legal costs by allowing them to receive the maximum payment without hiring a lawyer to restructure the farm.  The spouse equity rule is retained in its entirety.  Married couples who qualify under the spouse rule would receive up to twice the nominal payment limitations, as under current law.
 
Close loopholes.  All payments will be tracked through entities and partnerships directly back to the individual who is the ultimate beneficiary. All payments would count toward an individual's limit, whether received directly or through a corporation or other type of entity.  All beneficial interests in an entity would be subject to payment limitations, making it more difficult to create "paper" farms for the purposes of exceeding the limits.
 
Ensure that payments flow to working farmers.   Current law attempts to target payments to working farmers.  However, as explained in the final report of the USDA Payment Limitation Commission and as demonstrated by the 2004 Government Accountability Office Report, the lack of a defined active management test in law and regulation is a major loophole facilitating huge payments.  The amendment improves the "measurable standard" by which USDA determines who should and should not receive farm payments. It requires that management be personally provided on a regular, substantial, and continuous basis through direct supervision and direction of farming activities and labor and on-site services.  The combined labor and management standard is 1,000 hours annually or 50% of the commensurate share of the required labor and management.  Landowners who share rent land to an actively-engaged producer remain exempt from the "actively engaged" rules provided their payments are commensurate to their risk in the crop produced (see note [ii] below).