Key provisions of the 2008 farm bill need your attention
W hile the new farm bill is being written, it pays to focus on the last year of the bill still in play. With farm income projected to be lower this year than the all-time record in 2011, key changes in farm program benefits could impact your bottom line in 2012.
"For starters and perhaps most important, make sure your farm operating plan [FOP] is current and up to date," says Wayne Myers, director of farm program services for Kennedy and Coe. The Farm Service Agency (FSA) uses your FOP as the source document for its end-of-year review or audit, and if the document is not accurate, it may be difficult to get through the review. That could jeopardize significant program payments. FSA also has the ability to look back to prior years if it thinks there may be an eligibility problem.
The FOP identifies the ownership of the farming operation and how the entity and/or members contribute capital, land, equipment, labor and management to the operation.
Say a son or daughter joins the family partnership in 2012 but also works full-time off the farm. FSA allows the partnership to contribute land, capital and equipment on behalf of each member, but only the members themselves can contribute labor and management.
In our example, the majority of the labor is hired by the partnership. The son or daughter must identify the percentage of management they contribute (which should be commensurate with their ownership) and must detail the types of management activities they performed. Those activities must occur on a regular basis and be identifiable and documentable.
Some FSA offices have told producers they can’t qualify for the payment if they don’t provide physical labor to the operation. "That is incorrect and not supported by the regulations,"
Perhaps the best way to document contributions per owner, he explains, is to hold monthly, or at the very least, quarterly meetings, with a good set of minutes. "Good management minutes have helped more producers meet the ‘actively engaged’ test than any other tool I know of," he says.
Program changes. One change for 2012 is that the Supplemental Revenue Assistance Payments program ended on Sept. 30, 2011. USDA has also beefed up its Conservation Reserve Program and similar programs for fragile land.
Your adjusted gross income has a bearing on whether you will receive payments, Myers says. A new con-gressional act passed this past December added an additional eligibility threshold for direct decoupled (DD) payments for 2012. Producers must meet the following criteria in order to qualify for payments:
- The three-year average (2008 to 2010 for 2012 payments) of nonfarm income must not exceed $500,000.
- The three-year average of farm income must not exceed $750,000.
- The three-year average of combined nonfarm and farm income must not exceed $1 million.
ACRE worth a look. The Average Crop Revenue Election (ACRE) program is not new, but few farmers participate in it. Myers advises that farmers give the program a close look for 2012, however, because the pri-mary cost of ACRE is a 20% reduction in the DD payment through 2012. This is also the last year of the program.
Participation in ACRE in 2012 means "cheap insurance" for wheat, feed grain, oilseed, cotton and rice producers, Myers adds. The deadline to enroll in the program is June 1. For more information on ACRE, go to www.fsa.usda.gov.