The FSA just issued proposed Regulations yesterday regarding the active involvement of non-family members in a farm operation. The Farm Bill had required FSA to come up with these new rules within six months of the passage of the bill. And as usual, they are late.
These new rules do not apply to a farm operation if is comprised solely of family members. However, if the partnership or joint venture has at least one non-family member that has ownership, then the new rules do apply. This could easily arise in larger operations where a long-time key non-family member is brought into the operation which could result in these restrictions applying.
The new rules only allow one manager to receive farm program payments unless the farm operation is large which would allow one additional manager to receive program payments. A large operation has more than 2,500 acres, 10,000 hives or 3,500 ewes. Large complex operations would be allowed one more manager. A complex operation must first be large and then have multiple crops. If the operation grew only one or two crops (such as corn and soybeans), it may not qualify as complex no matter how large the operation. In no cases will any farm operation be allowed more than 3 managers.
These rules do not apply to any farming operation that doing business in a limited entity such as a corporation, LLC, LLP, LP or LLLP. These operations are already limited to only one $125,000 payment limitation.
The proposed rules require the farm manager to work at least 500 hours or at least 25% of all active farm management of the operation. The farm manager would be required to keep a log of all hours worked on the farm during the year including the following information:
- Location where the activity was performed; and
- Time expended and duration of management activity performed.
The FSA is projecting that about 1,400 joint operations could lose eligibility for around $50 million in total crop year 2016 to 2018 farm payments with the majority occurring in 2016.
My projection is if these rules pass as is, you may see many of these large complex farm operations be broken down into smaller operations to receive multiple farm program payments. The Regulations do not appear to address this issue, however, they are not final yet.