WASHINGTON, April 15, 2015 – Analysts say the Agriculture Department’s new subsidy eligibility requirements are going to make it significantly tougher for investors in a small number of big farming operations to qualify for multiple government payments. The 2014 farm bill mandated that USDA’s Farm Service Agency write a proposed rule that sets tighter requirements for partnerships and joint ventures that aren’t entirely family run.
The rule would limit the number of people who can qualify for subsidies as farm managers to three per operation, and set stringent requirements for two of those three managers: Each one would have to provide at least 25 percent of the total management of the operations or at least 500 hours annually, and the managers would have to document their work. The time requirements don’t apply to the first manager.
Bill Bridgforth, an agricultural lawyer in Pine Bluff, Arkansas, said the 500-hour requirement is unrealistically high given the mechanization of modern farms and the relatively small amount of time it takes to make key management decisions, such as applying for an operating loan or deciding whether to buy a new combine. “It’s foolishness to say that management decisions that are critical can be quantified by time. They are quantified only by the result,” he said.
If USDA doesn’t ease the proposed requirements, some large partnerships may have to be break up to maintain their eligibility for federal payments, he said. “Instead of one partnership with nine (partners) there may be three partnerships of three” partners, he said.
But even that restructuring won’t be easy to do, said Jonathan Coppess, a former Farm Service Agency administrator who was chief counsel to the Senate Agriculture Committee during development of the 2014 farm bill. Coppess, who now teaches agricultural law and policy at the University of Illinois, said the members of the new entities would have to meet the requirements for contribution of capital, equipment and land. “It would be interesting to see if any/many take that route,” he said in an email.
Coppess said the proposed rule should take care of “many of the concerns” that have been raised about USDA’s current rules over the years. Critics have long argued that subsidies unfairly provide big farms with the capital to squeeze out smaller competitors.
But Coppess said the department failed to justify why it proposed more stringent requirements for the second and third managers than it did for the first. “The proposed changes create differential treatment for farm managers without much explanation or justification,” he writes in an analysis of the rule.
Coppess said USDA also should consider going beyond the recordkeeping requirement to mandate that farm managers provide reports of their work.
Bridgforth, meanwhile, hopes pressure from Congress will force USDA to ease the management definition. That’s what happened in 1988, he said, after USDA tried to impose similar requirements the year before.
“I hope that the secretary and others will realize that the idea of quantifying management by virtue of hours is just not workable and not realistic,” he said.
USDA estimates that about 1,400 operations could lose eligibility for about $50 million in total subsidies for the 2016 through 2018 crop years. Each qualified recipient can receive up to $125,000 in total annual benefits.
According to the rule, the department is entertaining the idea of tightening the requirement further. The department said it wants comments on “whether there should be a strict limit of one manager, or if another option should be implemented to reduce the risk that individuals who have little involvement in a farming operation use the active personal management provision to qualify the farming operation for farm program payments.”
USDA, which is taking comment on the rule until May 26, is already getting some pushback. One commenter said that providing land to an operation is “no less important” than helping to manage it: “Some of those who provide the land but provide little or no management may be equally vulnerable economically as those who are the primary providers of management.”
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